This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

In-Kind Finance: A Theory of Trade Credit

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Mike Burkart
Tore Ellingsen

Additional information is available for the following registered author(s):

Abstract

It is typically less profitable for an opportunistic borrower to divert inputs than to divert cash. Therefore, suppliers may lend more liberally than banks. This simple argument is at the core of our contract theoretic model of trade credit in competitive markets. The model implies that trade credit and bank credit can be either complements or substitutes. Among other things, the model explains why trade credit has short maturity, why trade credit is more prevalent in less developed credit markets, and why accounts payable of large unrated firms are more countercyclical than those of small firms.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help file. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.aeaweb.org/aer/contents/june2004.html
File Format: application/pdf
File Function:
Download Restriction: Access to full text is restricted to AEA members.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Publisher Info
Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 94 (2004)
Issue (Month): 3 (June)
Pages: 569-590
Download reference. The following formats are available: HTML, plain text, BibTeX, RIS (EndNote), ReDIF
Handle: RePEc:aea:aecrev:v:94:y:2004:i:3:p:569-590

Contact details of provider:
Email:
Web page: http://www.aeaweb.org/aer/
More information through EDIRC

Order Information:
Web: http://www.aeaweb.org/subscribe.html

For technical questions regarding this item, or to correct its listing, contact: (Christopher F. Baum).

Related research
Keywords:

Other versions of this item:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Demirguc-Kunt, Asli & Maksimovic, Vojislav, 2001. "Firms as financial intermediaries - evidence from trade credit data," Policy Research Working Paper Series 2696, The World Bank. [Downloadable!]
  2. Tore Ellingsen & Mike Burkart, 2002. "In-Kind Finance," FMG Discussion Papers dp421, Financial Markets Group. [Downloadable!] (restricted)
    Other versions:
  3. Rajan, Raghuram G & Zingales, Luigi, 1995. " What Do We Know about Capital Structure? Some Evidence from International Data," Journal of Finance, American Finance Association, vol. 50(5), pages 1421-60, December. [Downloadable!] (restricted)
    Other versions:
  4. Sopranzetti, Ben J., 1998. "The economics of factoring accounts receivable," Journal of Economics and Business, Elsevier, vol. 50(4), pages 339-359, July. [Downloadable!] (restricted)
  5. Ferris, J Stephen, 1981. "A Transactions Theory of Trade Credit Use," The Quarterly Journal of Economics, MIT Press, vol. 96(2), pages 243-70, May. [Downloadable!] (restricted)
  6. Nilsen, Jeffrey H, 2002. "Trade Credit and the Bank Lending Channel," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 34(1), pages 226-53, February.
    Other versions:
  7. Jain, Neelam, 2001. "Monitoring costs and trade credit," The Quarterly Review of Economics and Finance, Elsevier, vol. 41(1), pages 89-110. [Downloadable!] (restricted)
  8. Oliner, Stephen D & Rudebusch, Glenn D, 1996. "Monetary Policy and Credit Conditions: Evidence from the Composition of External Finance: Comment," American Economic Review, American Economic Association, vol. 86(1), pages 300-309, March. [Downloadable!] (restricted)
  9. Chee K. Ng & Janet Kiholm Smith & Richard L. Smith, 1999. "Evidence on the Determinants of Credit Terms Used in Interfirm Trade," Journal of Finance, American Finance Association, vol. 54(3), pages 1109-1129, 06. [Downloadable!] (restricted)
  10. Stewart C. Myers & Raghuram G. Rajan, 1998. "The Paradox Of Liquidity," The Quarterly Journal of Economics, MIT Press, vol. 113(3), pages 733-771, August. [Downloadable!] (restricted)
    Other versions:
  11. Brick, Ivan E & Fung, William K H, 1984. " Taxes and the Theory of Trade Debt," Journal of Finance, American Finance Association, vol. 39(4), pages 1169-76, September. [Downloadable!] (restricted)
  12. Nadiri, M Ishaq, 1969. "The Determinants of Trade Credit in the U.S. Total Manufacturing Sector," Econometrica, Econometric Society, vol. 37(3), pages 408-23, July. [Downloadable!] (restricted)
  13. Mian, Shehzad L & Smith, Clifford W, Jr, 1992. " Accounts Receivable Management Policy: Theory and Evidence," Journal of Finance, American Finance Association, vol. 47(1), pages 169-200, March. [Downloadable!] (restricted)
  14. Smith, Janet Kiholm, 1987. " Trade Credit and Informational Asymmetry," Journal of Finance, American Finance Association, vol. 42(4), pages 863-72, September. [Downloadable!] (restricted)
  15. Brennan, Michael J & Maksimovic, Vojislav & Zechner, Josef, 1988. " Vendor Financing," Journal of Finance, American Finance Association, vol. 43(5), pages 1127-41, December. [Downloadable!] (restricted)
  16. Raymond Fisman & Inessa Love, 2003. "Trade Credit, Financial Intermediary Development, and Industry Growth," Journal of Finance, American Finance Association, vol. 58(1), pages 353-374, 02. [Downloadable!] (restricted)
  17. Petersen, Mitchell A & Rajan, Raghuram G, 1994. " The Benefits of Lending Relationships: Evidence from Small Business Data," Journal of Finance, American Finance Association, vol. 49(1), pages 3-37, March. [Downloadable!] (restricted)
  18. Benjamin S. Wilner, 2000. "The Exploitation of Relationships in Financial Distress: The Case of Trade Credit," Journal of Finance, American Finance Association, vol. 55(1), pages 153-178, 02. [Downloadable!] (restricted)
  19. Mariassunta Giannetti, 2000. "Do Better Institutions Mitigate Agency Problems? Evidence from Corporate Finance Choices," Temi di discussione (Economic working papers) 376, Bank of Italy, Economic Research Department. [Downloadable!]
    Other versions:
  20. Michael S. Long & Ileen B. Malitz & S. Abraham Ravid, 1993. "Trade Credit, Quality Guarantees, and Product," Financial Management, Financial Management Association, vol. 22(4), Winter.
  21. Xavier Freixas, 1993. "Short Term Credit Versus Account Receivable Financing," Economics Working Papers 27, Department of Economics and Business, Universitat Pompeu Fabra.
  22. Biais, Bruno & Gollier, Christian, 1997. "Trade Credit and Credit Rationing," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 10(4), pages 903-37.
  23. Giuseppe Marotta, 2001. "Is trade credit more expensive than bank loans? Evidence from Italian firm-level data," Heterogeneity and monetary policy 0103, Universita di Modena e Reggio Emilia, Dipartimento di Economia Politica. [Downloadable!]
  24. Myers, Stewart C., 1977. "Determinants of corporate borrowing," Journal of Financial Economics, Elsevier, vol. 5(2), pages 147-175, November. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Frederic Boissay & Reint Gropp, 2007. "Trade credit defaults and liquidity provision by firms," Working Paper Series 753, European Central Bank. [Downloadable!]
    Other versions:
  2. Guy Yamashiro & Iichiro Uesugi, 2006. "Economic Conditions and Japanese Firm Financing," Economics Bulletin, Economics Bulletin, vol. 5(12), pages 1-17. [Downloadable!]
  3. Hirofumi Uchida & Gregory F. Udell & Wako Watanabe, 2006. "Are Trade Creditors Relationship Lenders?," Discussion papers 06026, Research Institute of Economy, Trade and Industry (RIETI). [Downloadable!]
  4. Daniela Fabbri & Anna Maria Cristina Menichini, 2005. "In kind finance, collateral and cheap trade credit," CSEF Working Papers 146, Centre for Studies in Economics and Finance (CSEF), University of Salerno, Italy, revised 01 Mar 2006. [Downloadable!]
  5. Rocco Macchiavello, 2007. "Vertical Integration, Missing Middle and Investor Protection in Developing Countries," Economics Series Working Papers 373, University of Oxford, Department of Economics. [Downloadable!]
  6. TSURUTA Daisuke, 2007. "Credit Contagion and Trade Credit Supply: Evidence from Small Business Data in Japan," Discussion papers 07043, Research Institute of Economy, Trade and Industry (RIETI). [Downloadable!]
  7. Rose Cunningham, 2004. "Trade Credit and Credit Rationing in Canadian Firms," Working Papers 04-49, Bank of Canada. [Downloadable!]
  8. Cunningham, Rose, 2005. "Trade Credit and Credit Rationing in Canadian Firms," Economic Analysis (EA) Research Paper Series 2005036e, Statistics Canada, Analytical Studies Branch. [Downloadable!]
  9. Iichiro Uesugi & Guy M. Yamashiro, 2004. "How Trade Credit Differs from Loans: Evidence from Japanese Trading Companies," Discussion papers 04028, Research Institute of Economy, Trade and Industry (RIETI). [Downloadable!]
  10. Tian Zhu & Lixin Colin Xu & Cull, Robert, 2007. "Formal finance and trade credit during China ' s transition," Policy Research Working Paper Series 4204, The World Bank. [Downloadable!]
Statistics
Access and download statistics

Did you know? Each page is provided with a technical contact, in case something is not right with the supplied information. See under "publisher info".

This page was last updated on 2008-7-16.


This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.