Title: Customer and supplier pressure on financial distress: evidence from USA

Authors: Post Raj Pokharel

Addresses: Otago Business School, University of Otago, Dunedin, New Zealand; Boston International College, Bharatpur, Nepal

Abstract: This study examines the customer and supplier pressure through the effect of trade credit on financial distress using 30 years of USA corporate data (1992-2023) from the Compustat database. The findings reveal a nuanced relationship: an increase in trade payables elevates the likelihood of financial distress, while trade receivables mitigate distress up to a threshold. The study further documents a U-shaped relationship between trade payables and financial distress, and an inverted U-shaped relationship between trade receivables and economic health. This study contributes to the literature by uncovering non-linear dynamics between trade credit and financial distress, enriching managerial and policy insights.

Keywords: financial distress; trade credit; liquidity; creditors; debtors; bankruptcy; Altman_Z.

DOI: 10.1504/AJFA.2025.149905

American Journal of Finance and Accounting, 2025 Vol.8 No.4, pp.340 - 364

Received: 31 Dec 2024
Accepted: 31 Aug 2025
Published online: 17 Nov 2025 *

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