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Access to Institutional Finance and the Use of Trade Credit

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  • Christina Atanasova

Abstract

I develop a conceptual framework for analyzing the effect of the availability of institutional loans on firms' demand for supplier (trade) finance. I test for the existence of credit constraints and their effect on corporate financing policies. My empirical results support the hypothesis that trade credit is taken up by firms as a substitute for institutional finance at the margin when they are credit constrained. Further, in line with studies on the credit channel of monetary policy transmission, I find an increased reliance on trade credit by financially constrained firms during periods of tight money.

Suggested Citation

  • Christina Atanasova, 2007. "Access to Institutional Finance and the Use of Trade Credit," Financial Management, Financial Management Association International, vol. 36(1), pages 49-67, March.
    • Handle: RePEc:bla:finmgt:v:36:y:2007:i:1:p:49-67
    DOI: 10.1111/j.1755-053X.2007.tb00164.x
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    References listed on IDEAS

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