Jean-Noel Barrot

Trade Credit and Industry Dynamics: Evidence from Trucking Firms

When customers value trade credit, financial strength confers a comparative advantage in the product market. To test this idea and its implications, I consider an exogenous restriction on the trade credit provision of French trucking firms enacted in 2006. Using a difference-in-differences approach, I find that trade credit provision and profits decrease mostly among financially stronger firms, that financially weaker ones increase investment more and default less, and that entry in the trucking sector increases following the reform. Transport users facing larger financial constraints or growth opportunities experience the sharpest drop in accounts payable, which they offset by shrinking their inventories. Altogether, the results suggest that financially weaker firms curtail investment to offer trade credit to their customers, and that long payment terms extended by financially stronger suppliers impede the entry and expansion of financially weaker ones. JEL classification: G32, G33, G34, D23

Investor Horizon and the Life Cycle of Innovative Firms: Evidence from Venture Capital

This paper studies whether and how the contractual horizon of venture capital funds affects their investments in innovative firms. I find that funds with a longer remaining horizon select younger companies at an earlier stage of their development, which grow their patent stock significantly more than companies financed by funds with a shorter horizon. The sensitivity of investment decisions to horizon is stronger among experienced venture capital firms, who allocate investments across a larger number of fund vintages. Finally, I find that the interaction of funds’ fixed horizon with their option-like compensation structure affects their investment decisions: when early performance has been high, fund managers target less innovative companies. These findings shed light on the drivers of venture capital investment decisions and on their implications for the type of companies that receive venture capital financing. This paper was accepted by Gustavo Manso, finance.

The Globalization Risk Premium

We investigate how the displacement risk associated with import competition is reflected in the cost of capital. We sort U.S. industries on their exposure to import competition, based on shipping costs. We find that output and employment in high exposure industries is more sensitive to tariff cuts than in low exposure industries, consistent with the idea that they face a higher risk of being displaced by import competition. We then show that high exposure industries have a higher cost of capital. We confirm displacement risk of import competition is priced and covaries with the marginal utility of the representative agent.