IDEAS home Printed from https://ideas.repec.org/p/jet/dpaper/dpaper58.html
   My bibliography  Save this paper

Trade Credits under Imperfect Enforcement: A Theory with a Test on Chinese Experience

Author

Listed:
  • Yanagawa, Noriyuki
  • Ito, Seiro
  • Watanabe, Mariko

Abstract

It is widely recognized that trade credit is an important financial mechanism, particularly in developing economies and transition economies where institutions are weak. This paper documents theoretical analysis and empirical accounts on what facilitates an effective supply of trade credit based on original surveys conducted in P.R. of China. Our theory predicts that trade volume and trade credit are increasing function of cash held by the buyer and enforcement technology of the seller. Furthermore, if the state sector’s enforcement technology is high, it has positive external effect to expand the volumes of trade credit and trades in the whole economy. From the data, we found that government made active commitment in enforcement of trade credit contract and the government owned firms are main supplier and receivers of trade credit, which suggest that enforcement by government and state sector were effective against presumptions in the previous literatures.

Suggested Citation

  • Yanagawa, Noriyuki & Ito, Seiro & Watanabe, Mariko, 2006. "Trade Credits under Imperfect Enforcement: A Theory with a Test on Chinese Experience," IDE Discussion Papers 58, Institute of Developing Economies, Japan External Trade Organization(JETRO).
  • Handle: RePEc:jet:dpaper:dpaper58
    as

    Download full text from publisher

    File URL: https://ir.ide.go.jp/?action=repository_action_common_download&item_id=38108&item_no=1&attribute_id=22&file_no=1
    File Function: First version, 2006
    Download Restriction: no

    More about this item

    Keywords

    Law and finance; Economic growth; Incomplete contract; Enforcement; Trade policy; Credit; China; 経済成長; 貿易政策; 信用; 中国;

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • K0 - Law and Economics - - General
    • O5 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies
    • P31 - Economic Systems - - Socialist Institutions and Their Transitions - - - Socialist Enterprises and Their Transitions
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:jet:dpaper:dpaper58. 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: (Minami Tosa). General contact details of provider: http://edirc.repec.org/data/idegvjp.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.

    We have no references for this item. You can help adding them by using 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.

    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.