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Trade credit and bank relationships: evidence from pre-World War I Belgium

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  • Marc Deloof
  • Wouter Van Overfelt

Abstract

We investigate the determinants of trade credit granted by suppliers in a historical environment which was characterized by high-information asymmetries and strong banks, focusing on the role of bank-firm relationships. Our results, which are based on a unique sample of 535 firm-year observations for 125 listed Belgian firms in four dominant industries in the period 1905 to 1909, are generally consistent with the financing role of trade credit. They suggest that trade credit was a tool for channelling funds from firms with close bank ties to other firms, which is consistent with findings for contemporary developing countries.

Suggested Citation

  • Marc Deloof & Wouter Van Overfelt, 2011. "Trade credit and bank relationships: evidence from pre-World War I Belgium," Applied Economics, Taylor & Francis Journals, vol. 43(13), pages 1647-1655.
    • Handle: RePEc:taf:applec:v:43:y:2011:i:13:p:1647-1655
    DOI: 10.1080/00036840903166269
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    Cited by:

    1. Nisar Ahmad & Talat Afza & Bilal Nafees, 2017. "Determinants of Trade Credit Extended by Manufacturing Firms Listed in Pakistan," Business & Economic Review, Institute of Management Sciences, Peshawar, Pakistan, vol. 9(4), pages 287-314, December.
    2. Harald Badinger & Thomas Url, 2013. "Export Credit Guarantees and Export Performance: Evidence from Austrian Firm-level Data," The World Economy, Wiley Blackwell, vol. 36(9), pages 1115-1130, September.
    3. Jaleel Ahmed & Hui Xiaofeng & Shahid Kalim Khan, 2015. "Investigation of trade credit demand patterns in effect with firm-bank relationship: A panel data approach," Journal of Asian Business Strategy, Asian Economic and Social Society, vol. 5(3), pages 46-54, March.

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