1. Hsien-hsing Liao Department of Finance National Taiwan University
Comments on “Credit Contagion and the Amplification of the Crisis of ”
Hsien-hsing Liao
Department of Finance
National Taiwan University

2. Contents
Summary
Comments
Suggestions

3. Summaries of This Paper-1
Major Objective:
This study examines credit contagion through supplier-customer relationship using American bankruptcy firms data during period of 2005 to 2009.

4. Summaries of This Paper-2
Major preliminary findings:
Suppliers are more prone to customer default, especially in crisis period.
Balance contagion is more pronounced for industrial firms.

5. General Comments
The research topic of this study is very interesting. Credit contagion issues have been very hot after the recent financial tsunami. Unveiling the exact mechanisms of the contagion phenomenon is important for both academic literature and regulatory policy makings.
The preliminary findings show the potentials of this paper.

6. Suggestions-1
When doing panel regressions, controlling for firm (or industry) and time fixed effects is necessary.
When doing regressions, collinearity checks should be done. Variables from financial statements are usually highly correlated.

7. Suggestions-1I
Considering the possibility of heteroskedasticity in estimating panel regressions, suggesting using methods of White’s (1984) robust standard errors or Peterson’s (2009) robust standard errors clustered at industry and time level simultaneously.
White, H., 1984, “A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity, Econometrica 48,
Petersen, M. 2009, “Estimating Standard Errors in Finance Panel Data Sets: Comparing Approaches.” Review of Financial Studies, 22, 7