"The Reality of Short-term Shocks like the 'Credit Crunch' of 1997-1999 and the 'Financial Crisis' of 2007, and the Effectiveness of 'Emergency' Economic Measures - A Follow-up to Miwa [2008]" (in Japanese)

The Reality of Trade Credit and its Link to Bank Borrowing and Inventory: (1) Overall Discussion and Preliminary Investigation". This is the third of the 4 discussion papers that, together with the Introduction and Summary paper (Miwa, 2010c), comprise the report of my recent investigation: "A Study of Financing Behavior of Japanese Firms with Firm-Level Data from Corporate Enterprise Quarterly Statistics - 1994~2009". The findings in the first two discussion papers invite readers to consider "trade credit", and ask "what were the alternative sources of financing for the firms? Did they involve trade credit?" Some readers will recall that -- when criticized by the public and the government for not lending more extensively -- the banks had replied that good borrowers were not asking for money. Because of the strength of the conventional wisdom, most researchers and policy makers have focused on bank finance. They have neglected the place within the financial market for other sources of funds like trade credit. This paper first reviews the current state of discussions about trade credit (III-2). It then provides an overview of the relationship among trade partners and banks (III-3). It uses firm-level data on trade credit (payables and receivables) and other financial items like bank borrowings, deposit, and inventory. Finally, it compares positive-bank-borrowing firms and zero-bank-borrowing firms, and concludes that there is no clear and important difference between them. In turn, this suggests that whether a firm borrowed from banks had no bearing on whether it suffered from financial constraints.