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Trade Credit, Bank Credit and Financial Crisis-super-




This paper examines trade credit behavior in a sample of small and medium enterprises in four East Asian countries before and after the financial crisis of 1998. We use a unique dataset that contains detailed data on trade credit amount and contract terms along with data on access to finance. We find that after the crisis, firms constrained in bank finance receive less trade credit in terms of percent of inputs bought on credit and shorter time of repayment. They also reduce credit extension to their customers in terms of quantity and length of time, due to a smaller pool of available finance. Discount terms rise on both receivables and payables. Our evidence does not support the hypothesis that trade credit can substitute for bank credit in times of the crisis, and instead suggests that liquidity shocks are propagated along the supply chains. Copyright (c) 2010 The Authors. Journal compilation (c) International Review of Finance Ltd. 2010.

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  • Inessa Love & Rida Zaidi, 2010. "Trade Credit, Bank Credit and Financial Crisis-super-," International Review of Finance, International Review of Finance Ltd., vol. 10(s1), pages 125-147.
  • Handle: RePEc:bla:irvfin:v:10:y:2010:i:s1:p:125-147

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    References listed on IDEAS

    1. Campello, Murillo & Graham, John R. & Harvey, Campbell R., 2010. "The real effects of financial constraints: Evidence from a financial crisis," Journal of Financial Economics, Elsevier, vol. 97(3), pages 470-487, September.
    2. Smith, Janet Kiholm, 1987. " Trade Credit and Informational Asymmetry," Journal of Finance, American Finance Association, vol. 42(4), pages 863-872, September.
    3. Raymond Fisman & Inessa Love, 2003. "Trade Credit, Financial Intermediary Development, and Industry Growth," Journal of Finance, American Finance Association, vol. 58(1), pages 353-374, February.
    4. Mike Burkart & Tore Ellingsen, 2004. "In-Kind Finance: A Theory of Trade Credit," American Economic Review, American Economic Association, vol. 94(3), pages 569-590, June.
    5. Nilsen, Jeffrey H, 2002. "Trade Credit and the Bank Lending Channel," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 34(1), pages 226-253, February.
    6. Love, Inessa & Preve, Lorenzo A. & Sarria-Allende, Virginia, 2007. "Trade credit and bank credit: Evidence from recent financial crises," Journal of Financial Economics, Elsevier, vol. 83(2), pages 453-469, February.
    7. Ramey, Valerie A., 1992. "The source of fluctuations in money : Evidence from trade credit," Journal of Monetary Economics, Elsevier, vol. 30(2), pages 171-193, November.
    8. Gropp, Reint & Boissay, Frédéric, 2007. "Trade credit defaults and liquidity provision by firms," Working Paper Series 753, European Central Bank.
    9. Brennan, Michael J & Maksimovic, Vojislav & Zechner, Josef, 1988. " Vendor Financing," Journal of Finance, American Finance Association, vol. 43(5), pages 1127-1141, December.
    10. Biais, Bruno & Gollier, Christian, 1997. "Trade Credit and Credit Rationing," Review of Financial Studies, Society for Financial Studies, vol. 10(4), pages 903-937.
    11. Benjamin S. Wilner, 2000. "The Exploitation of Relationships in Financial Distress: The Case of Trade Credit," Journal of Finance, American Finance Association, vol. 55(1), pages 153-178, February.
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    Cited by:

    1. Lin, Tsung-Te & Chou, Jian-Hsin, 2015. "Trade credit and bank loan: Evidence from Chinese firms," International Review of Economics & Finance, Elsevier, vol. 36(C), pages 17-29.
    2. Adalto Barbaceia Gonçalves & Rafael Schiozer & Hsia Hua Sheng, 2018. "Trade Credit and Product Market Power during a Financial Crisis," Working Papers CEB 18-004, ULB -- Universite Libre de Bruxelles.
    3. Akbar, Saeed & Rehman, Shafiq ur & Ormrod, Phillip, 2013. "The impact of recent financial shocks on the financing and investment policies of UK private firms," International Review of Financial Analysis, Elsevier, vol. 26(C), pages 59-70.
    4. Teimouri, Sheida & Dutta, Nabamita, 2016. "Investment and bank credit recovery after banking crises," Journal of Financial Stability, Elsevier, vol. 26(C), pages 306-327.
    5. Constantin-Bogdan, VORONEANU, 2013. "The Credit Relationship Between Banks And Companies And Its Effects On The Real Economy," Management Strategies Journal, Constantin Brancoveanu University, vol. 21(3), pages 105-112.
    6. repec:kap:rqfnac:v:50:y:2018:i:2:d:10.1007_s11156-017-0637-x is not listed on IDEAS
    7. repec:eee:asieco:v:50:y:2017:i:c:p:1-13 is not listed on IDEAS
    8. Murphy, Gavin & Siedschlag, Iulia, 2016. "Exporting under Financing Constraints: Firm-level Evidence from EU Countries," Papers WP530, Economic and Social Research Institute (ESRI).

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