IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

How Do Small Businesses Finance their Growth Opportunities? – The Case of Recovery from the Lost Decade in Japan?

  • Daisuke Tsuruta

    (National Graduate Institute for Policy Studies)

Registered author(s):

    We investigate the financial resources used by small businesses in Japan during the period of recovery from a severe recession. Unlike large listed firms, small businesses cannot easily issue commercial debt or equity. Therefore, small businesses largely depend on trade credit and bank loans. Many previous studies argue that bank loans are cheaper than trade credit; so many firms (particularly unconstrained firms) use bank loans, especially in financially developed economies. However, the Japanese evidence does not support this view. First, small businesses with higher credit demand increase trade credit more during the period of the recovery from a severe recession. Second, creditworthy firms (for example, firms with more collateral assets) also increase trade credit to finance their growth opportunities. Third, firms in unstable industries increase trade credit more. This suggests that suppliers are able to offer credit, unlike banks, as they have a relative advantage in day-by-day monitoring.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: http://www.grips.ac.jp/r-center/wp-content/uploads/09-19_new.pdf
    Download Restriction: no

    Paper provided by National Graduate Institute for Policy Studies in its series GRIPS Discussion Papers with number 09-19.

    as
    in new window

    Length: 50 pages
    Date of creation: Jan 2010
    Date of revision:
    Handle: RePEc:ngi:dpaper:09-19
    Contact details of provider: Postal: 7-22-1 Roppongi, Minato-ku, Tokyo, Japan 106-8677
    Phone: +81-(0)3-6439-6000
    Fax: +81-(0)3-6439-6010
    Web page: http://www.grips.ac.jp/r-center/en/discussion_papers/

    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.:

    as in new window
    1. 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, 06.
    2. Vicente Cuñat, 2002. "Trade credit: Suppliers as debt collectors and insurance providers," Economics Working Papers 625, Department of Economics and Business, Universitat Pompeu Fabra, revised Feb 2004.
    3. Jeffrey H. Nilsen, 1999. "Trade Credit and the Bank Lending Channel," Working Papers 99.04, Swiss National Bank, Study Center Gerzensee.
    4. 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.
    5. 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(04), pages 897-925, December.
    6. Fisman, Raymond & Love, Inessa, 2001. "Trade credit, financial intermediary development, and industry growth," Policy Research Working Paper Series 2695, The World Bank.
    7. Yoshiro Miwa & J. Mark Ramseyer, 2008. "The Implications of Trade Credit for Bank Monitoring: Suggestive Evidence from Japan," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 17(2), pages 317-343, 06.
    8. Ge, Ying & Qiu, Jiaping, 2007. "Financial development, bank discrimination and trade credit," Journal of Banking & Finance, Elsevier, vol. 31(2), pages 513-530, February.
    9. Giuseppe Marotta, 1997. "Does trade credit redistribution thwart monetary policy? Evidence from Italy," Applied Economics, Taylor & Francis Journals, vol. 29(12), pages 1619-1629.
    10. Burkart, Mike & Ellingsen, Tore, 2002. "In-Kind Finance," CEPR Discussion Papers 3536, C.E.P.R. Discussion Papers.
    11. Smith, Janet Kiholm, 1987. " Trade Credit and Informational Asymmetry," Journal of Finance, American Finance Association, vol. 42(4), pages 863-72, September.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:ngi:dpaper:09-19. 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 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 references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link 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 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.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.