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Karimirad, Ali

University of British Columbia

This thesis explores the dynamics of trade credit, corporate yield spreads, and supply chain disruptions, emphasizing their impact on market efficiency and firm financial stability. The first study provides concrete evidence of the economic distortions created by trade credit by examining a multi-sector, input-output model with endogenous defaults. It demonstrates how limited liability constraints lead to persistent misallocations, inducing over-ordering of intermediate inputs and excessive credit demand. The second study challenges the adequacy of traditional financial metrics like leverage ratios and liquidity premiums in the corporate yield spread assessment. It analyzes trends in corporate yield spreads using U.S. panel data from 1994 to 2016. The study identifies a significant, long-term increase in yield spreads, contrasting with a decline in idiosyncratic firm-level volatility and stable market volatility. A detailed variance decomposition analysis highlights that firm-level volatility significantly influences yield spreads, especially post-2000, explaining 16% of their variation. This study concludes that traditional financial metrics are inadequate to explain the persistent rise in spreads during this period. The third study addresses the implications of technological complexity and input diversity on firms' susceptibility to supply chain disruptions. Introducing a novel metric, the "supply chain-induced default rate," the research quantifies the impact of supplier failures or delays, with this rate strongly correlating with credit spreads and explaining about 80% of their increase over time. This study underscores the importance of incorporating supply chain dynamics into financial risk assessments. It suggests a nuanced approach to evaluating firm vulnerabilities related to supply chain disruptions. Together, these studies contribute to understanding how trade credit, corporate finance, and supply chain management interact to shape market behaviours and financial stability, providing new insights into economic policy and corporate strategy.

Text

2024-07-22

Attribution-NonCommercial-NoDerivatives 4.0 International

http://hdl.handle.net/2429/88669

Economics

University of British Columbia

UBCV

http://creativecommons.org/licenses/by-nc-nd/4.0/