Trade Credit and Bank Lending: An Investigation into the Determinants of UK Manufacturing Firms' Access to Trade Credit
AbstractTrade credit is an important source of finance for firms, but it has typically been excluded from the analysis of the credit channel. In this paper we examine a panel of 16,000 manufacturing firm records for the years 1990 through 1999. We show that the uptake of trade credit varies with the monetary cycle, increasing when interest rates are high and falling when rates fall; this offers indirect evidence in support of the bank lending channel. We discover that suppliers evaluate the creditworthiness of firms on much the same basis as banks, with solvency, credit risk and age all improving the access to trade credit. We conclude that trade credit is taken up by firms as a substitute for bank finance at the margin when they are credit constrained.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by European University Institute in its series Economics Working Papers with number ECO2003/03.
Date of creation: 2003
Date of revision:
Contact details of provider:
Postal: Badia Fiesolana, Via dei Roccettini, 9, 50016 San Domenico di Fiesole (FI) Italy
Web page: http://www.eui.eu/ECO/
More information through EDIRC
Find related papers by JEL classification:
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
This paper has been announced in the following NEP Reports:
- NEP-ENT-2003-07-13 (Entrepreneurship)
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Domenico Delli Gatti & Mauro Gallegati & Bruce Greenwald & Alberto Russo & Joseph Stiglitz, 2009. "Business fluctuations and bankruptcy avalanches in an evolving network economy," Journal of Economic Interaction and Coordination, Springer, vol. 4(2), pages 195-212, November.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Marcia Gastaldo).
If references are entirely missing, you can add them using this form.