Trade Credit and Informational Asymmetry.

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Smith, Janet Kiholm;
  • Journal: Journal of Finance, volume 42, issue 4 September, pages 863-72
  • Subject:
    acm: ComputingMilieux_COMPUTERSANDSOCIETY

Commonly used trade credit terms implicitly define a high interest rate that operates as an efficient screening device where information about buyer default risk is asymmetrically held. By offering trade credit, a seller can identify prospective defaults more quickl y t... View more
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