Journal of Applied
Finance & Research

Abstract

We develop and empirically validate a model of working capital optimization that explicitly accounts for the propagation of payment terms across multi tier manufacturing supply chains. The paper formally derives equilibrium conditions under which supplier financing programs improve aggregate liquidity, and it quantifies the welfare cost of unilateral term extensions imposed by dominant buyers. The findings are supported by transaction data covering 2,100 supplier buyer dyads in the automotive and electronics sectors.

References

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