IDEAS home Printed from https://ideas.repec.org/p/eti/dpaper/13037.html
   My bibliography  Save this paper

Real Driver of Trade Credit

Author

Listed:
  • TSURUTA Daisuke
  • UCHIDA Hirofumi

Abstract

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.

Suggested Citation

  • TSURUTA Daisuke & UCHIDA Hirofumi, 2013. "Real Driver of Trade Credit," Discussion papers 13037, Research Institute of Economy, Trade and Industry (RIETI).
  • Handle: RePEc:eti:dpaper:13037
    as

    Download full text from publisher

    File URL: https://www.rieti.go.jp/jp/publications/dp/13e037.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. John McMillan & Christopher Woodruff, 1999. "Interfirm Relationships and Informal Credit in Vietnam," The Quarterly Journal of Economics, Oxford University Press, vol. 114(4), pages 1285-1320.
    2. Casey, Eddie & O'Toole, Conor M., 2014. "Bank lending constraints, trade credit and alternative financing during the financial crisis: Evidence from European SMEs," Journal of Corporate Finance, Elsevier, vol. 27(C), pages 173-193.
    3. Mateut, Simona & Bougheas, Spiros & Mizen, Paul, 2006. "Trade credit, bank lending and monetary policy transmission," European Economic Review, Elsevier, vol. 50(3), pages 603-629, April.
    4. Smith, Janet Kiholm, 1987. "Trade Credit and Informational Asymmetry," Journal of Finance, American Finance Association, vol. 42(4), pages 863-872, September.
    5. UCHIDA Hirofumi & UESUGI Iichiro & HOTEI Masaki, 2010. "Repayment Enforcement and Informational Advantages: Empirical determinants of trade credit use," Discussion papers 10041, Research Institute of Economy, Trade and Industry (RIETI).
    6. Choi, Woon Gyu & Kim, Yungsan, 2005. "Trade Credit and the Effect of Macro-Financial Shocks: Evidence from U.S. Panel Data," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 40(4), pages 897-925, December.
    7. Simon Johnson & John McMillan & Christopher Woodruff, 2002. "Property Rights and Finance," American Economic Review, American Economic Association, vol. 92(5), pages 1335-1356, December.
    8. Petersen, Mitchell A & Rajan, Raghuram G, 1997. "Trade Credit: Theories and Evidence," Review of Financial Studies, Society for Financial Studies, vol. 10(3), pages 661-691.
    9. Emery, Gary W & Nayar, Nandkumar, 1998. "Product Quality and Payment Policy," Review of Quantitative Finance and Accounting, Springer, vol. 10(3), pages 269-284, May.
    10. Raymond Fisman & Mayank Raturi, 2004. "Does Competition Encourage Credit Provision? Evidence from African Trade Credit Relationships," The Review of Economics and Statistics, MIT Press, vol. 86(1), pages 345-352, February.
    11. Robert Kieschnick & Mark Laplante & Rabih Moussawi, 2013. "Working Capital Management and Shareholders' Wealth," Review of Finance, European Finance Association, vol. 17(5), pages 1827-1852.
    12. Kazuo Ogawa & Takanori Tanaka, 2013. "The global financial crisis and small- and medium-sized enterprises in Japan: how did they cope with the crisis?," Small Business Economics, Springer, vol. 41(2), pages 401-417, August.
    13. Fabbri, Daniela & Klapper, Leora, 2008. "Market power and the matching of trade credit terms," Policy Research Working Paper Series 4754, The World Bank.
    14. 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.
    15. Garcia-Appendini, Emilia & Montoriol-Garriga, Judit, 2013. "Firms as liquidity providers: Evidence from the 2007–2008 financial crisis," Journal of Financial Economics, Elsevier, vol. 109(1), pages 272-291.
    16. Guariglia, Alessandra & Mateut, Simona, 2006. "Credit channel, trade credit channel, and inventory investment: Evidence from a panel of UK firms," Journal of Banking & Finance, Elsevier, vol. 30(10), pages 2835-2856, October.
    17. 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.
    18. Carlos A. Molina & Lorenzo A. Preve, 2012. "An Empirical Analysis of the Effect of Financial Distress on Trade Credit," Financial Management, Financial Management Association International, vol. 41(1), pages 187-205, March.
    19. Brennan, Michael J & Maksimovic, Vojislav & Zechner, Josef, 1988. " Vendor Financing," Journal of Finance, American Finance Association, vol. 43(5), pages 1127-1141, December.
    20. Mariassunta Giannetti & Mike Burkart & Tore Ellingsen, 2011. "What You Sell Is What You Lend? Explaining Trade Credit Contracts," Review of Financial Studies, Society for Financial Studies, vol. 24(4), pages 1261-1298.
    21. Biais, Bruno & Gollier, Christian, 1997. "Trade Credit and Credit Rationing," Review of Financial Studies, Society for Financial Studies, vol. 10(4), pages 903-937.
    22. Leora Klapper & Luc Laeven & Raghuram Rajan, 2012. "Trade Credit Contracts," Review of Financial Studies, Society for Financial Studies, vol. 25(3), pages 838-867.
    23. Giuseppe Marotta, 1997. "Does trade credit redistribution thwart monetary policy? Evidence from Italy," Applied Economics, Taylor & Francis Journals, vol. 29(12), pages 1619-1629.
    24. Arup Daripa & Jeffrey Nilsen, 2011. "Ensuring Sales: A Theory of Inter-firm Credit," American Economic Journal: Microeconomics, American Economic Association, vol. 3(1), pages 245-279, February.
    25. 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.
    26. Cem Demiroglu & Christopher James & Atay Kizilaslan, 2012. "Bank Lending Standards and Access to Lines of Credit," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 44(6), pages 1063-1089, September.
    27. Justin Murfin & Ken Njoroge, 2015. "The Implicit Costs of Trade Credit Borrowing by Large Firms," Review of Financial Studies, Society for Financial Studies, vol. 28(1), pages 112-145.
    28. 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.
    29. Demirguc-Kunt, Asli & Maksimovic, Vojislav, 2001. "Firms as financial intermediaries - evidence from trade credit data," Policy Research Working Paper Series 2696, The World Bank.
    30. Jean-Noël Barrot, 2016. "Trade Credit and Industry Dynamics: Evidence from Trucking Firms," Journal of Finance, American Finance Association, vol. 71(5), pages 1975-2016, October.
    31. Van Horen, Neeltje, 2004. "Trade Credit as a Competitiveness Tool;Evidence from Developing Countries," MPRA Paper 2792, University Library of Munich, Germany, revised Mar 2005.
    32. Stanley D. Longhofer & Joao A.C. Santos, 2003. "The Paradox of Priority," Financial Management, Financial Management Association, vol. 32(1), Spring.
    33. Nishant Dass & Jayant R. Kale & Vikram Nanda, 2015. "Trade Credit, Relationship-specific Investment, and Product Market Power," Review of Finance, European Finance Association, vol. 19(5), pages 1867-1923.
    34. Emery, Gary W., 1987. "An Optimal Financial Response to Variable Demand," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 22(2), pages 209-225, June.
    35. Philip Bond, 2004. "Bank and Nonbank Financial Intermediation," Journal of Finance, American Finance Association, vol. 59(6), pages 2489-2529, December.
    36. Matthew D. Hill & G. Wayne Kelly & Michael J. Highfield, 2010. "Net Operating Working Capital Behavior: A First Look," Financial Management, Financial Management Association International, vol. 39(2), pages 783-805, June.
    37. Atanasova, Christina V. & Wilson, Nicholas, 2004. "Disequilibrium in the UK corporate loan market," Journal of Banking & Finance, Elsevier, vol. 28(3), pages 595-614, March.
    38. Bougheas, Spiros & Mateut, Simona & Mizen, Paul, 2009. "Corporate trade credit and inventories: New evidence of a trade-off from accounts payable and receivable," Journal of Banking & Finance, Elsevier, vol. 33(2), pages 300-307, February.
    39. J. Stephen Ferris, 1981. "A Transactions Theory of Trade Credit Use," The Quarterly Journal of Economics, Oxford University Press, vol. 96(2), pages 243-270.
    40. Emily Breza & Andres Liberman, 2017. "Financial Contracting and Organizational Form: Evidence from the Regulation of Trade Credit," Journal of Finance, American Finance Association, vol. 72(1), pages 291-324, February.
    41. Morris G. Danielson & Jonathan A. Scott, 2004. "Bank Loan Availability and Trade Credit Demand," The Financial Review, Eastern Finance Association, vol. 39(4), pages 579-600, November.
    42. Gertler, Mark & Gilchrist, Simon, 1993. "The cyclical behavior of short-term business lending: Implications for financial propagation mechanisms," European Economic Review, Elsevier, vol. 37(2-3), pages 623-631, April.
    43. Chee K. Ng & Janet Kiholm Smith & Richard L. Smith, 1999. "Evidence on the Determinants of Credit Terms Used in Interfirm Trade," Journal of Finance, American Finance Association, vol. 54(3), pages 1109-1129, June.
    44. Santiago Carbó‐Valverde & Francisco Rodríguez‐Fernández & Gregory F. Udell, 2016. "Trade Credit, the Financial Crisis, and SME Access to Finance," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 48(1), pages 113-143, February.
    45. Katrien Kestens & Philippe Van Cauwenberge & Heidi Vander Bauwhede, 2012. "Trade credit and company performance during the 2008 financial crisis," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 52(4), pages 1125-1151, December.
    46. Petersen, Mitchell A & Rajan, Raghuram G, 1994. "The Benefits of Lending Relationships: Evidence from Small Business Data," Journal of Finance, American Finance Association, vol. 49(1), pages 3-37, March.
    47. 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.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. TSURUTA Daisuke & UCHIDA Hirofumi, 2021. "Does Trade Credit Absorb Adverse Shocks?," Discussion papers 21089, Research Institute of Economy, Trade and Industry (RIETI).
    2. Tsuruta, Daisuke, 2019. "Working capital management during the global financial crisis: Evidence from Japan," Japan and the World Economy, Elsevier, vol. 49(C), pages 206-219.
    3. Grzegorz Zimon & Robert Dankiewicz, 2020. "Trade Credit Management Strategies in SMEs and the COVID-19 Pandemic—A Case of Poland," Sustainability, MDPI, vol. 12(15), pages 1-16, July.
    4. Martha Coleman & Mengyun Wu, 2020. "Combination of Ant Colony Optimization and K-nearest Neighbours: The Influence of Working Capital Management on Corporate Performance," Management and Labour Studies, XLRI Jamshedpur, School of Business Management & Human Resources, vol. 45(4), pages 395-415, November.
    5. Tsuruta, Daisuke, 2016. "No lending relationships and liquidity management of small businesses during a financial shock," Journal of the Japanese and International Economies, Elsevier, vol. 42(C), pages 31-46.
    6. TSURUTA Daisuke, 2017. "Working Capital Management during Financial Crisis: Evidence from Japan," Discussion papers 17045, Research Institute of Economy, Trade and Industry (RIETI).
    7. Ono, Arito & Uesugi, Iichiro, 2014. "SME Financing in Japan during the Global Financial Crisis: Evidence from Firm Surveys," HIT-REFINED Working Paper Series 6, Institute of Economic Research, Hitotsubashi University.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Altunok, Fatih & Mitchell, Karlyn & Pearce, Douglas K., 2020. "The trade credit channel and monetary policy transmission: Empirical evidence from U.S. panel data," The Quarterly Review of Economics and Finance, Elsevier, vol. 78(C), pages 226-250.
    2. Abdulla, Yomna & Dang, Viet Anh & Khurshed, Arif, 2017. "Stock market listing and the use of trade credit: Evidence from public and private firms," Journal of Corporate Finance, Elsevier, vol. 46(C), pages 391-410.
    3. Mariarosaria Agostino & Francesco Trivieri, 2014. "Does trade credit play a signalling role? Some evidence from SMEs microdata," Small Business Economics, Springer, vol. 42(1), pages 131-151, January.
    4. Pierluigi Murro & Valentina Peruzzi, 2020. "Relationship lending and the use of trade credit: the role of relational capital and private information," Working Papers CASMEF 2006, Dipartimento di Economia e Finanza, LUISS Guido Carli.
    5. Hasan, Mostafa Monzur & Habib, Ahsan, 2019. "Social capital and trade credit," International Review of Financial Analysis, Elsevier, vol. 61(C), pages 158-174.
    6. Maria Cristina Arcuri & Raoul Pisani, 2021. "Is Trade Credit a Sustainable Resource for Medium-Sized Italian Green Companies?," Sustainability, MDPI, vol. 13(5), pages 1-19, March.
    7. Uchida, Hirofumi & Udell, Gregory F. & Watanabe, Wako, 2013. "Are trade creditors relationship lenders?," Japan and the World Economy, Elsevier, vol. 25, pages 24-38.
    8. Tsuruta, Daisuke, 2015. "Bank loan availability and trade credit for small businesses during the financial crisis," The Quarterly Review of Economics and Finance, Elsevier, vol. 55(C), pages 40-52.
    9. Abdulla, Yomna & Dang, Viet Anh & Khurshed, Arif, 2020. "Suppliers' listing status and trade credit provision," Journal of Corporate Finance, Elsevier, vol. 60(C).
    10. El Ghoul, Sadok & Zheng, Xiaolan, 2016. "Trade credit provision and national culture," Journal of Corporate Finance, Elsevier, vol. 41(C), pages 475-501.
    11. Mateut, Simona & Chevapatrakul, Thanaset, 2018. "Customer financing, bargaining power and trade credit uptake," International Review of Financial Analysis, Elsevier, vol. 59(C), pages 147-162.
    12. Nam, Hocheol & Uchida, Konari, 2019. "Accounts payable and firm value: International evidence," Journal of Banking & Finance, Elsevier, vol. 102(C), pages 116-137.
    13. D'Mello, Ranjan & Toscano, Francesca, 2020. "Economic policy uncertainty and short-term financing: The case of trade credit," Journal of Corporate Finance, Elsevier, vol. 64(C).
    14. Bougheas, Spiros & Mateut, Simona & Mizen, Paul, 2009. "Corporate trade credit and inventories: New evidence of a trade-off from accounts payable and receivable," Journal of Banking & Finance, Elsevier, vol. 33(2), pages 300-307, February.
    15. Afrifa, Godfred Adjapong & Gyapong, Ernest & Monem, Reza M., 2018. "Product differentiation, market dynamics and the value relevance of trade payables: Evidence from UK listed firms," Journal of Contemporary Accounting and Economics, Elsevier, vol. 14(3), pages 235-253.
    16. Gonçalves, Adalto Barbaceia & Schiozer, Rafael F. & Sheng, Hsia Hua, 2018. "Trade credit and product market power during a financial crisis," Journal of Corporate Finance, Elsevier, vol. 49(C), pages 308-323.
    17. McGuinness, Gerard & Hogan, Teresa & Powell, Ronan, 2018. "European trade credit use and SME survival," Journal of Corporate Finance, Elsevier, vol. 49(C), pages 81-103.
    18. Leora Klapper & Luc Laeven & Raghuram Rajan, 2012. "Trade Credit Contracts," Review of Financial Studies, Society for Financial Studies, vol. 25(3), pages 838-867.
    19. Chod, Jiri & Lyandres, Evgeny & Yang, S. Alex, 2019. "Trade credit and supplier competition," Journal of Financial Economics, Elsevier, vol. 131(2), pages 484-505.
    20. Mateut, Simona & Mizen, Paul & Ziane, Ydriss, 2015. "Inventory composition and trade credit," International Review of Financial Analysis, Elsevier, vol. 42(C), pages 434-446.

    More about this item

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eti:dpaper:13037. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://edirc.repec.org/data/rietijp.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: TANIMOTO, Toko (email available below). General contact details of provider: https://edirc.repec.org/data/rietijp.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.