Trade Credit: Theories and Evidence

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ID: 290564
1997
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Abstract
Firms may be financed by their suppliers rather than by financial institutions. There are many theories of trade credit, but few comprehensive empirical tests. This article attempts to fill the gap. We focus on small firms whose access to capital markets may be limited and find evidence suggesting that firms use more trade credit when credit from financial institutions is unavailable. Suppliers lend to constrained firms because they have a comparative advantage in getting information about buyers, they can liquidate assets more efficiently, and they have an implicit equity stake in the firms. Finally, firms with better access to credit offer more trade credit.
Reference Key
openalex_W3122318539 Use this key to autocite in the manuscript while using SciMatic Manuscript Manager or Thesis Manager
Authors Mitchell A. Petersen, Raghuram G. Rajan
Journal review of financial studies
Year 1997
DOI
10.1093/rfs/10.3.661
URL
https://doi.org/10.1093/rfs/10.3.661
Keywords Keywords not found

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