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The information content of trade credit

  • Aktas, Nihat
  • Bodt, Eric de
  • Lobez, Frédéric
  • Statnik, Jean-Christophe
Registered author(s):

    During 1992–2007, suppliers financed almost 10% of the total assets of US listed firms. This intensive usage of trade credit is puzzling in the light of its high (implicit) costs. By arguing that trade credit use provides valuable information to outside investors, we first derive a theoretical model that predicts a positive correlation between trade credit use and the quality of the firm’s investments. Then, using several proxies for firm’s investment quality (Z-score, return on assets, and long-run abnormal returns), we show that this prediction receives strong support from a large sample of US firms.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0378426611003463
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    Article provided by Elsevier in its journal Journal of Banking & Finance.

    Volume (Year): 36 (2012)
    Issue (Month): 5 ()
    Pages: 1402-1413

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    Handle: RePEc:eee:jbfina:v:36:y:2012:i:5:p:1402-1413
    Contact details of provider: Web page: http://www.elsevier.com/locate/jbf

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