Does Trade Credit Provides Favorable Information to Banks? Evidence from Japan
This paper examines whether trade credit as a credible signal about firm fs creditworthiness to banks facilitates provision of bank credit to the firms receiving trade credit. Using data on Japanese manufacturing firms over the period 1990-1995, we find that firms receiving trade credit are provided short-term credit by less-informed banks. Consequently, in the firms that have arm fs-length relations with banks, trade credit plays an important role in mitigating asymmetric information problems between firms and banks, thereby facilitating extension of bank credit.
|Date of creation:||Jul 2009|
|Date of revision:||Feb 2010|
|Contact details of provider:|| Web page: http://www2.econ.osaka-u.ac.jp/library/global/e_HP/e_g_shiryo.html|
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