Does Trade Credit Provides Favorable Information to Banks? Evidence from Japan
AbstractThis paper examines whether trade credit as a credible signal about firmfs creditworthiness to banks facilitates provision of bank credit to the firms receiving trade credit. Using data on Japanese manufacturing firms over the period 1990-1995, we find that firms receiving trade credit are provided short-term credit by less-informed banks. Consequently, in the firms that have armfs-length relations with banks, trade credit plays an important role in mitigating asymmetric information problems between firms and banks, thereby facilitating extension of bank credit.
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Bibliographic InfoPaper provided by Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP) in its series Discussion Papers in Economics and Business with number 09-22-Rev.
Length: 12 pages
Date of creation: Jul 2009
Date of revision: Feb 2010
Trade Credit; Bank Credit;
Find related papers by JEL classification:
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-04-17 (All new papers)
- NEP-BAN-2010-04-17 (Banking)
- NEP-CTA-2010-04-17 (Contract Theory & Applications)
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