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Pré-Publication, Document De Travail Année : 2023

Wisdom of Crowds along the Supply Chain

Résumé

Using the Twitter setting, we examine whether social media data about trade debtors’ prospects are informative for assessing their creditworthiness. We employ a regression discontinuity design to exploit the random, discrete variation in the debtors’ consumer satisfaction scores around discontinuities created by exogenous, pre-determined rounding rules. We document an increase in supplier-awarded trade credit (by about 1.3 [0.4] percent of the cost of goods sold [assets]) in response to a rounding-induced 1-point surge in these scores, which have a 0-100 range. In the cross-section, we find that this effect holds mainly when: (i) trade debtors fall within the “inconclusive region” of a key traditional financial health metric; (ii) uncertainties about trade debtors’ future earnings and future cash flows are high; (iii) there is no previous debtor-supplier relationship; and (iv) debtors have strong negotiation power. Overall, our evidence suggests that suppliers use alternative data to mitigate uncertainties about trade debtors’ prospects.
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Dates et versions

hal-04415431 , version 1 (24-01-2024)

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Jeong-Bon Kim, Albert Mensah, Vicki Wei Tang, M.H. Franco Wong. Wisdom of Crowds along the Supply Chain: Causal Evidence from Trade Credit. 2023. ⟨hal-04415431⟩

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