Trade Credit and Customer Portfolio Approach to Managing Cash Flow Variability

References

• AES Corporation (2005) Form 8-K (current report) ex-99.1 filed April 05, 2005. Accessed January 1, 2023, https://aescorp2020cr.q4web.com/sec-documents/sec-filings-details/default.aspx?FilingId=3587940.Google Scholar
• Agca S, Babich V, Birge JR, Wu J (2022) Credit shock propagation along supply chains: Evidence from the CDS market. Management Sci. 68(9):6506–6538.Link, Google Scholar
• Agrawal A, Chandra K, Maloney M, Tam M (2020) Planning for uncertainty: Performance management under COVID-19. Accessed July 5, 2022, https://www.mckinsey.com/~/media/McKinsey/Business%20Functions/Strategy%20and%20Corporate%20Finance/Our%20Insights/Planning%20for%20uncertainty%20Performance%20management%20under%20COVID%2019/Planning-for-uncertainty-Performance-management-under-COVID-19.pdf.Google Scholar
• Arora K, Gaur V (2025) A structural model of a firm’s operating cash flow with applications. Management Sci., ePub ahead of print February 12, https://doi.org/10.1287/mnsc.2021.03790.Google Scholar
• Arrow KJ, Karlin S, Scarf HE, Beckmann MJ (1958) Studies in the Mathematical Theory of Inventory and Production, vol. 1. (Stanford University Press, Stanford, CA).Google Scholar
• Asset Benchmark Research (2019) Treasury review. Accessed July 5, 2022, https://www.theasset.com/archive/38699/the-quest-for-liquidity.Google Scholar
• Babich V, Tang CS (2012) Managing opportunistic supplier product adulteration: Deferred payments, inspection, and combined mechanisms. Manufacturing Service Oper. Management 14(2):301–314.Link, Google Scholar
• Barth ME, Cram DP, Nelson KK (2001) Accruals and the prediction of future cash flows. Accounting Rev. 76(1):27–58.Crossref, Google Scholar
• Bartram SM, Brown GW, Minton BA (2010) Resolving the exposure puzzle: The many facets of exchange rate exposure. J. Financial Econom. 95(2):148–173.Crossref, Google Scholar
• Baumol WJ (1952) The transactions demand for cash: An inventory theoretic approach. Quart. J. Econom. 545–556Google Scholar
• Blanchard OJ, Lopez-de Silanes F, Shleifer A (1994) What do firms do with cash windfalls? J. Financial Econom. 36(3):337–360.Crossref, Google Scholar
• Bray RL, Mendelson H (2012) Information transmission and the bullwhip effect: An empirical investigation. Management Sci. 58(5):860–875.Link, Google Scholar
• Cai G, Chen X, Xiao Z (2014) The roles of bank and trade credits: Theoretical analysis and empirical evidence. Production Oper. Management 23(4):583–598.Crossref, Google Scholar
• Caldentey R, Haugh MB (2009) Supply contracts with financial hedging. Oper. Res. 57(1):47–65.Link, Google Scholar
• Charoenwong B, Han M, Wu J (2023) Trade and foreign economic policy uncertainty in supply chain networks: Who comes home? Manufacturing Service Oper. Management 25(1):126–147.Link, Google Scholar
• Chod J (2017) Inventory, risk shifting, and trade credit. Management Sci. 63(10):3207–3225.Link, Google Scholar
• Chod J, Lyandres E, Yang SA (2019a) Trade credit and supplier competition. J. Financial Econom. 131(2):484–505.Crossref, Google Scholar
• Chod J, Rudi N, Van Mieghem JA (2010) Operational flexibility and financial hedging: Complements or substitutes? Management Sci. 56(6):1030–1045.Link, Google Scholar
• Chod J, Trichakis N, Tsoukalas G (2019b) Supplier diversification under buyer risk. Management Sci. 65(7):3150–3173.Link, Google Scholar
• Continental Materials Corporation (2019) Form 10-k filed for the fiscal year ended December 28, 2019. Accessed January 1, 2023, https://www.sec.gov/Archives/edgar/data/24104/000155837020003027/cuo-20191228x10k.htm.Google Scholar
• Dass N, Kale JR, Nanda V (2015) Trade credit, relationship-specific investment, and product market power. Rev. Finance 19(5):1867–1923.Crossref, Google Scholar
• Devalkar SK, Anupindi R, Sinha A (2018) Dynamic risk management of commodity operations: Model and analysis. Manufacturing Service Oper. Management 20(2):317–332.Link, Google Scholar
• Emery GW (1987) An optimal financial response to variable demand. J. Financial Quant. Anal. (Oxford) 22(2):209–225.Crossref, Google Scholar
• Fabbri D, Klapper LF (2016) Bargaining power and trade credit. J. Corporate Finance 41:66–80.Crossref, Google Scholar
• Freeman K (2023) The lender’s lender: Trade credit and the monitoring role of banks. Preprint, submitted January 18, https://dx.doi.org/10.2139/ssrn.3235838.Google Scholar
• Froot KA, Scharfstein DS, Stein JC (1993) Risk management: Coordinating corporate investment and financing policies. J. Finance 48(5):1629–1658.Crossref, Google Scholar
• García-Teruel PJ, Martínez-Solano P (2010) A dynamic perspective on the determinants of accounts payable. Rev. Quant. Financial Accounting 34(4):439–457.Crossref, Google Scholar
• Gaur V, Seshadri S (2005) Hedging inventory risk through market instruments. Manufacturing Service Oper. Management 7(2):103–120.Link, Google Scholar
• Géczy C, Minton BA, Schrand C (1997) Why firms use currency derivatives. J. Finance 52(4):1323–1354.Crossref, Google Scholar
• Girgis NM (1968) Optimal cash balance levels. Management Sci. 15(3):130–140.Link, Google Scholar
• Gümüş M, Ray S, Gurnani H (2012) Supply-side story: Risks, guarantees, competition, and information asymmetry. Management Sci. 58(9):1694–1714.Link, Google Scholar
• Hadlock CJ, Pierce JR (2010) New evidence on measuring financial constraints: Moving beyond the KZ index. Rev. Financial Stud. 23(5):1909–1940.Crossref, Google Scholar
• Haley CW, Higgins RC (1973) Inventory policy and trade credit financing. Management Sci. 20(4-part-i):464–471.Link, Google Scholar
• Hankins KW (2011) How do financial firms manage risk? Unraveling the interaction of financial and operational hedging. Management Sci. 57(12):2197–2212.Link, Google Scholar
• Heyman DP (1973) A model for cash balance management. Management Sci. 19(12):1407–1413.Link, Google Scholar
• Hoberg G, Moon SK (2017) Offshore activities and financial vs operational hedging. J. Financial Econom. 125(2):217–244.Crossref, Google Scholar
• Jensen MC (1986) Agency costs of free cash flow, corporate finance and takeovers. Amer. Econom. Rev. 76(2):323–329.Google Scholar
• Kim YS, Mathur I, Nam J (2006) Is operational hedging a substitute for or a complement to financial hedging? J. Corporate Finance 12(4):834–853.Crossref, Google Scholar
• Klapper L, Laeven L, Rajan R (2011) Trade credit contracts. Rev. Financial Stud. 25(3):838–867.Crossref, Google Scholar
• Kouvelis P, Turcic D (2021) Supporting operations with financial hedging: Cash hedging vs. cost hedging in an automotive industry. Production Oper. Management 30(3):738–749.Crossref, Google Scholar
• Kouvelis P, Zhao W (2012) Financing the newsvendor: Supplier vs. bank, and the structure of optimal trade credit contracts. Oper. Res. 60(3):566–580.Link, Google Scholar
• Kouvelis P, Wu X, Xiao Y (2019) Cash hedging in a supply chain. Management Sci. 65(8):3928–3947.Link, Google Scholar
• Lee HL, Padmanabhan V, Whang S (1997) Information distortion in a supply chain: The bullwhip effect. Management Sci. 43(4):546–558.Link, Google Scholar
• Lee H-H, Zhou J, Wang J (2018) Trade credit financing under competition and its impact on firm performance in supply chains. Management Service Oper. Management 20(1):36–52.Link, Google Scholar
• Lewbel A (2012) Using heteroscedasticity to identify and estimate mismeasured and endogenous regressor models. J. Bus. Econom. Statist. 30(1):67–80.Crossref, Google Scholar
• Long MS, Malitz IB, Ravid SA (1993) Trade credit, quality guarantees, and product marketability. Financial Management 22(4):117–127.Crossref, Google Scholar
• Luo W, Shang KH (2019) Managing inventory for firms with trade credit and deficit penalty. Oper. Res. 67(2):468–478.Abstract, Google Scholar
• Minton BA, Schrand C (1999) The impact of cash flow volatility on discretionary investment and the costs of debt and equity financing. J. Financial Econom. 54(3):423–460.Crossref, Google Scholar
• Ng CK, Smith JK, Smith RL (1999) Evidence on the determinants of credit terms used in interfirm trade. J. Finance 54(3):1109–1129.Crossref, Google Scholar
• Osadchiy N, Schmidt W, Wu J (2021) The bullwhip effect in supply networks. Management Sci. 67(10):6153–6173.Link, Google Scholar
• PCS Edventures Inc (2016) Form 10-k filed for the fiscal year ended March 31, 2016. Accessed January 1, 2023, https://www.sec.gov/Archives/edgar/data/1122020/000149315216011009/form10-k.htm.Google Scholar
• Peura H, Yang SA, Lai G (2017) Trade credit in competition: A horizontal benefit. Manufacturing Service Oper. Management 19(2):263–289.Link, Google Scholar
• Rountree B, Weston JP, Allayannis G (2008) Do investors value smooth performance? J. Financial Econom. 90(3):237–251.Crossref, Google Scholar
• Schmidt W, Osadchiy N, Wu J (2021) The right way to mix and match your customers. MIT Sloan Management Rev. 62(4):12–14.Google Scholar
• Tong J, DeCroix G, Song J-S (2020) Modeling payment timing in multiechelon inventory systems with applications to supply chain coordination. Manufacturing Service Oper. Management 22(2):346–363.Link, Google Scholar
• Turcic D, Kouvelis P, Bolandifar E (2015) Hedging commodity procurement in a bilateral supply chain. Manufacturing Service Oper. Management 17(2):221–235.Link, Google Scholar
• Wang Y, Li J, Wu D, Anupindi R (2021) When ignorance is not bliss: An empirical analysis of subtier supply network structure on firm risk. Management Sci. 67(4):2029–2048.Link, Google Scholar
• Wuttke D (2025) Empirical evidence on payment term extensions in the reverse factoring context. Production Oper. Management. Forthcoming.Google Scholar
• Yang SA, Birge JR (2018) Trade credit, risk sharing, and inventory financing portfolios. Management Sci. 64(8):3667–3689.Link, Google Scholar