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Are Trade Creditors Relationship Lenders?

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  • Hirofumi Uchida
  • Gregory F. Udell
  • Wako Watanabe

Abstract

Despite the importance of the hypothesis that trade creditors may act as relationship lenders, it has been virtually impossible to directly test this hypothesis because of a lack of data. We attempt to overcome this problem by using a relatively new Japanese database on small and midsized enterprises (SMEs) that contains information on the strength of the buyer-seller relationship. We find some evidence that trade creditors may be relationship lenders. However, we also find evidence that trade creditors may be financial statement lenders. Our results are generally quite sensitive to model specification in both our "quantity" and "terms of credit" regressions. Thus, our results can only be viewed as suggestive of the possibility that trade creditors acquire private soft information over time and use this information to set the terms of trade financing.

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Bibliographic Info

Paper provided by Research Institute of Economy, Trade and Industry (RIETI) in its series Discussion papers with number 06026.

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Length: 33 pages
Date of creation: Apr 2006
Date of revision:
Handle: RePEc:eti:dpaper:06026

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References

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Citations

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Cited by:
  1. Marta Troya-Martinez, 2013. "Vertical Relational Contracts and Trade Credit," Economics Series Working Papers 648, University of Oxford, Department of Economics.
  2. Hirofumi Uchida & Gregory F.Udell & Wako Watanabe, 2007. "Bank Size and Lending Relationships in Japan," NBER Working Papers 13005, National Bureau of Economic Research, Inc.
  3. 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).
  4. Hirofumi Uchida & Gregory F. Udell & Nobuyoshi Yamori, 2006. "Loan Officers and Relationship Lending," Discussion papers 06031, Research Institute of Economy, Trade and Industry (RIETI).
  5. 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).
  6. 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.
  7. 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.
  8. 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.
  9. 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).

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