When Trade Credit Facilitates Access to Bank Finance: Evidence from Us Small Business Data
31 Pages Posted: 4 Dec 2003
Date Written: January 2004
Abstract
While trade credit is traditionally considered as a substitute for bank loans, recent theoretical papers (e.g. Biais and Gollier (1997)) suggest that bank debt and trade credit can also be considered as two complementary sources of financing. By using US small businesses data (NSSBF 1998), this paper provides an empirical analysis of these hypotheses. The empirical findings are consistent with the hypothesis that trade credit helps firms to improve their reputation. The results show that trade credit can work as a signal about firm's quality and thus facilitates access to bank debt.
Keywords: Bank, Trade credit, Informational asymetry
Keywords: bank Debt, Small Business Finance, Trade Credit
JEL Classification: G32
Suggested Citation: Suggested Citation
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