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Trade credit versus bank credit: Evidence from corporate inventory financing

  • Yang, Xiaolou
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    In this study, I introduce capital market imperfections into a structure framework of inventory investments and investigate impacts of trade credit on firms’ inventory dynamics and analyze the relationship between trade credit and bank loans. As a result, firms end up using a mix of trade credit and bank loans. I find that the use of trade credit and bank credit can be either complements or substitutes. During tight monetary periods, trade credit operates mainly as a substitute for bank borrowing while during looser monetary episodes even when the economy is weak, trade credit and bank loans are dominated by a complementary effect.

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    File URL: http://www.sciencedirect.com/science/article/pii/S106297691100024X
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    Article provided by Elsevier in its journal The Quarterly Review of Economics and Finance.

    Volume (Year): 51 (2011)
    Issue (Month): 4 ()
    Pages: 419-434

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    Handle: RePEc:eee:quaeco:v:51:y:2011:i:4:p:419-434
    Contact details of provider: Web page: http://www.elsevier.com/locate/inca/620167

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