Substitution of trade credit for bank credit: empirical study of financing behaviour of Indian
The hypothesis that companies substitute trade credit for bank credit during period of restricted monetary policy has been subject of empirical investigation for the reasons that it helps us to understand the linkages between the financial sector and real sector of economy. This paper examines whether companies in India substitute trade credit for bank credit during restricted monetary policy years. Using panel data econometric method the study uses time-series cross-section company level data of 828 manufacturing companies covering period from 1990 to 2001. The findings suggest that the magnitude of substitution of trade credit for bank credit is statistically significant during the monetary restrictive years. These results assume significance as about 40 per cent and 30 per cent of current assts constitute the trade credit and bank credit respectively. Both these put together is about 35 per cent of total asset of sample companies in India. The results also suggest that magnitude of substitution vary depending on the size of company.
|Date of creation:|
|Date of revision:|
|Contact details of provider:|| Phone: 91 79 2630 7241|
Fax: 91 79 2630 6896
Web page: http://www.iimahd.ernet.in/publications
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Jeffrey H. Nilsen, 1999.
"Trade Credit and the Bank Lending Channel,"
99.04, Swiss National Bank, Study Center Gerzensee.
- Kashyap, Anil K & Lamont, Owen A & Stein, Jeremy C, 1994.
"Credit Conditions and the Cyclical Behavior of Inventories,"
The Quarterly Journal of Economics,
MIT Press, vol. 109(3), pages 565-92, August.
- Anil K. Kashyap & Owen A. Lamont & Jeremy C. Stein, 1993. "Credit conditions and the cyclical behavior of inventories," Working Paper Series, Macroeconomic Issues 93-7, Federal Reserve Bank of Chicago.
- Bernanke, Ben & Gertler, Mark, 1995.
"Inside the Black Box: The Credit Channel of Monetary Policy Transmission,"
95-15, C.V. Starr Center for Applied Economics, New York University.
- Ben S. Bernanke & Mark Gertler, 1995. "Inside the Black Box: The Credit Channel of Monetary Policy Transmission," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 27-48, Fall.
- Ben S. Bernanke & Mark Gertler, 1995. "Inside the Black Box: The Credit Channel of Monetary Policy Transmission," NBER Working Papers 5146, National Bureau of Economic Research, Inc.
- Mark L. Gertler, 1988.
"Financial Structure and Aggregate Economic Activity: An Overview,"
NBER Working Papers
2559, National Bureau of Economic Research, Inc.
- Mark Gertler, 1988. "Financial structure and aggregate economic activity: an overview," Proceedings, Federal Reserve Bank of Cleveland, pages 559-596.
- Gertler, Mark, 1988. "Financial Structure and Aggregate Economic Activity: An Overview," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 20(3), pages 559-88, August.
- Mitchell A. Petersen & Raghuram G. Rajan, .
"Trade Credit: Theories and Evidence,"
CRSP working papers
322, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
- Kashyap, Anil K & Stein, Jeremy C & Wilcox, David W, 1993.
"Monetary Policy and Credit Conditions: Evidence from the Composition of External Finance,"
American Economic Review,
American Economic Association, vol. 83(1), pages 78-98, March.
- Anil K Kashyap & Jeremy C. Stein & David W. Wilcox, 1992. "Monetary Policy and Credit Conditions: Evidence From the Composition of External Finance," NBER Working Papers 4015, National Bureau of Economic Research, Inc.
- Anil K. Kashyap & Jeremy C. Stein & David W. Wilcox, 1991. "Monetary policy and credit conditions: evidence from the composition of external finance," Finance and Economics Discussion Series 154, Board of Governors of the Federal Reserve System (U.S.).
- Ferris, J Stephen, 1981. "A Transactions Theory of Trade Credit Use," The Quarterly Journal of Economics, MIT Press, vol. 96(2), pages 243-70, May.
When requesting a correction, please mention this item's handle: RePEc:iim:iimawp:wp01820. 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: ()
If references are entirely missing, you can add them using this form.