An economic downturn can occurred through unexpected events in various fields, such as the subprime mortgage crisis and the outbreak of Coronavirus Disease-2019 (COVID-19). Trade credit is important for small- and medium-sized enterprises (SMEs), especially during a monetary contraction, as it is the last option for firms that lack bank credit. This study aims to determine whether trade credit is profitable for the buyer and supplier firms during and after a financial crisis. We use panel data consisting of all trade credit transactions and financial statements of 5,751 Korean firms during the period 2008–2012. It shows that trade credit is more profitable for both buyers and suppliers in the post-crisis period than during the crisis. Moreover, trade payable is more effective for unconstrained buyers than for constrained buyers. Finally, a mixed strategy is superior to an aggressive or passive strategy of SMEs. The results suggest less profitability of trade credit during a period of contraction and greater sensitivity of the buyer SMEs, emphasizing the idiosyncratic liquidity strategy of each firm. This study can be helpful to develop a strategy of profitable trade credit for SMEs and to establish a policy of managing liquidity for the authority.

Abstract
1. Introduction
2. Literature Review and HypothesisDevelopment
    2.1. Monetary Contraction and Profitability
    2.2. Firm Strategy and Profitability
3. Data and Variables
    3.1. Dataset of Trade Credit
    3.2. Data Description
    3.3. Variables
4. Empirical Model and Specification
    4.1. Crisis Year
    4.2. Crisis and Post-Crisis Effects
    4.3. Contraction and Strategy of SMEs
5. Results
    5.1. Crisis Effects
    5.2. Contraction of SMEs
    5.3. Leveraging Strategies of SMEs
6. Conclusion
References

• Ohsung KWON(Korea Institute for Industrial Economics & Trade)
• Seung Hun HAN(School of Business and Technology Management, College of Business, KAIST)
• Duk Hee LEE(School of Business and Technology Management, College of Business, KAIST) Corresponding Author.