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Trade credit versus bank credit: Evidence from corporate inventory financing

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  • Yang, Xiaolou
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    Abstract

    In this study, I introduce capital market imperfections into a structure framework of inventory investments and investigate impacts of trade credit on firms’ inventory dynamics and analyze the relationship between trade credit and bank loans. As a result, firms end up using a mix of trade credit and bank loans. I find that the use of trade credit and bank credit can be either complements or substitutes. During tight monetary periods, trade credit operates mainly as a substitute for bank borrowing while during looser monetary episodes even when the economy is weak, trade credit and bank loans are dominated by a complementary effect.

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    Bibliographic Info

    Article provided by Elsevier in its journal The Quarterly Review of Economics and Finance.

    Volume (Year): 51 (2011)
    Issue (Month): 4 ()
    Pages: 419-434

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    Handle: RePEc:eee:quaeco:v:51:y:2011:i:4:p:419-434

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    Web page: http://www.elsevier.com/locate/inca/620167

    Related research

    Keywords: Trade credit; Bank loans; Inventory financing;

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    Cited by:
    1. Mariarosaria Agostino & Francesco Trivieri, 2014. "Does trade credit play a signalling role? Some evidence from SMEs microdata," Small Business Economics, Springer, vol. 42(1), pages 131-151, January.

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