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Trade credit: why do production firms act as financial intermediaries?

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  • Mitchell Berlin

Abstract

Trade credit remains the single largest source of short-term business credit in the United States and other nations around the world. Why do production firms act as financial intermediaries - a role usually reserved for banks? In \\"Trade Credit: Why Do Production Firms Act as Financial Intermediaries?\\" Mitchell Berlin focuses on explanations that view trade credit as a method of monitoring and enforcing loan contracts to relatively risky firms. He also examines explanations in which a firm's long-term supply relationship helps it to make better credit decisions than a bank world.

Suggested Citation

  • Mitchell Berlin, 2003. "Trade credit: why do production firms act as financial intermediaries?," Business Review, Federal Reserve Bank of Philadelphia, issue Q3, pages 21-28.
    • Handle: RePEc:fip:fedpbr:y:2003:i:q3:p:21-28
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    References listed on IDEAS

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    1. Brennan, Michael J & Maksimovic, Vojislav & Zechner, Josef, 1988. " Vendor Financing," Journal of Finance, American Finance Association, vol. 43(5), pages 1127-1141, December.
    2. Biais, Bruno & Gollier, Christian, 1997. "Trade Credit and Credit Rationing," Review of Financial Studies, Society for Financial Studies, vol. 10(4), pages 903-937.
    3. Burkart, Mike & Ellingsen, Tore, 2002. "In-kind finance," LSE Research Online Documents on Economics 24940, London School of Economics and Political Science, LSE Library.
    4. Demirguc-Kunt, Asli & Maksimovic, Vojislav, 2001. "Firms as financial intermediaries - evidence from trade credit data," Policy Research Working Paper Series 2696, The World Bank.
    5. J. Stephen Ferris, 1981. "A Transactions Theory of Trade Credit Use," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 96(2), pages 243-270.
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    Cited by:

    1. Olga María Rodríguez‐Rodríguez, 2008. "Firms as credit suppliers: an empirical study of Spanish firms," International Journal of Managerial Finance, Emerald Group Publishing Limited, vol. 4(2), pages 152-173, April.
    2. Stodder, James, 2009. "Complementary credit networks and macroeconomic stability: Switzerland's Wirtschaftsring," Journal of Economic Behavior & Organization, Elsevier, vol. 72(1), pages 79-95, October.
    3. 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).
    4. Andriakopoulos, Konstantinos & Kounetas, Konstantinos, 2019. "The impact of large lending on bank efficiency in U.S.A," MPRA Paper 96036, University Library of Munich, Germany.
    5. Hwan Lee, Chang & Rhee, Byong-Duk, 2010. "Coordination contracts in the presence of positive inventory financing costs," International Journal of Production Economics, Elsevier, vol. 124(2), pages 331-339, April.
    6. Howard P. Marvel & James Peck, 2008. "Inventory Turnover and Product Variety," Journal of Law and Economics, University of Chicago Press, vol. 51(3), pages 461-478, August.
    7. Lee, Chang Hwan & Rhee, Byong-Duk, 2011. "Trade credit for supply chain coordination," European Journal of Operational Research, Elsevier, vol. 214(1), pages 136-146, October.

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