Real Driver of Trade Credit
Employing unique data from a corporate survey, this paper examines whether changes in the amount of firms' trade debt are driven by real and/or financial measures taken by the firms in response to exogenous shocks. We find that firms that adopted real measures reduced their trade debt, while those that adopted financial measures increased it. We also find that real measures were more common than financial ones. These findings imply that changes in the amount of underlying real transactions, not changes in the terms of credit, are the real driver of changes in the amount of trade credit.
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