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Are trade creditors relationship lenders?

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Author Info

  • Uchida, Hirofumi
  • Udell, Gregory F.
  • Watanabe, Wako

Abstract

We test the hypothesis that trade creditors are relationship lenders using SME data from Japan. We find that the validity of the relationship lending hypothesis depends on the relative bargaining power between the buyer and sellers. Specifically, we find evidence that longer buyer–seller relationships may matter depending on the buyer–seller relative bargaining power. When a buyer depends too much on its main supplier, the supplier does not provide more credit as its relationship with the buyer matures. However, a longer buyer/main-supplier relationship is beneficial because a non-dependent buyer can obtain more overall credit from sellers. Depending on the extent to which this increase is due to an increase in the credit from the main suppliers, our findings are consistent with the relationship lending hypothesis. However, even if the increase mainly comes from other sellers, our findings imply that sellers extract a positive signal from a longer buyer/main-supplier relationship.

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Bibliographic Info

Article provided by Elsevier in its journal Japan and the World Economy.

Volume (Year): 25-26 (2013)
Issue (Month): ()
Pages: 24-38

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Handle: RePEc:eee:japwor:v:25-26:y:2013:i::p:24-38

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Web page: http://www.elsevier.com/locate/inca/505557

Related research

Keywords: Trade credit; Relationship lending; Credit availability; Information accumulation;

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References

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Citations

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Cited by:
  1. Hirofumi Uchida & Gregory F. Udell & Nobuyoshi Yamori, 2006. "Loan Officers and Relationship Lending," Discussion papers 06031, Research Institute of Economy, Trade and Industry (RIETI).
  2. TSURUTA Daisuke, 2009. "Customer Relationships and the Provision of Trade Credit during a Recession," Discussion papers 09043, Research Institute of Economy, Trade and Industry (RIETI).
  3. Santiago Carbó Valverde & Francisco Rodríguez-Fernández & Gregory F. Udell, 2008. "Bank lending, financing constraints and SME investment," Working Paper Series WP-08-04, Federal Reserve Bank of Chicago.
  4. Hirofumi Uchida & Gregory F. Udell & Wako Watanabe, 2008. "Bank size and lending relationships in Japan," NBER Chapters, in: Organizational Innovation and Firm Performance, pages 242-267 National Bureau of Economic Research, Inc.
  5. Vigneron, Ludovic & Daïri, Meriam, 2013. "Caractéristiques informationnelles du secteur d'activité et recours au crédit fournisseur
    [Informational characteristics of industry secteurs and trade credit use]
    ," MPRA Paper 51689, University Library of Munich, Germany.
  6. WATANABE Wako, 2007. "How Do Relationship Lenders Price Loans to Small Firms?: "Hold-Up" Costs, Transparency, and Private and Public Security," Discussion papers 07058, Research Institute of Economy, Trade and Industry (RIETI).
  7. 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).
  8. Marta Troya-Martinez, 2013. "Vertical Relational Contracts and Trade Credit," Economics Series Working Papers 648, University of Oxford, Department of Economics.
  9. Kenshi Taketa & Gregory F. Udell, 2007. "Lending Channels and Financial Shocks: The Case of Small and Medium-Sized Enterprise Trade Credit and the Japanese Banking Crisis," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 25(2), pages 1-44, November.

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