publication . Article . Other literature type . 1997

Trade Credit and Credit Rationing

Name: Trade Credit and Credit Rationing
Keywords: Economics and Econometrics, Accounting, Finance

Christian Gollier; Bruno Biais;

Restricted

Published: 01 Oct 1997 Journal: Review of Financial Studies, volume 10, pages 903-937 (issn: 0893-9454, eissn: 1465-7368,

Publisher: Oxford University Press (OUP)

Summary

Abstract

Asymmetric information between banks and firms can preclude financing of valuable projects. Trade credit alleviates this problem by incorporating in the lending relation the private information held by suppliers about their customers. Incentive compatibility conditions prevent collusion between two of the agents (e.g., the buyer and the seller) against the third (e.g., the bank). Consistent with the empirical findings of Petersen and Rajan (1995), firms without relationships with banks resort more to trade credit, and sellers with greater ability to generate cash lows provide more trade credit. Finally, small firms react to monetary contractions by using trade c...

doi: 10.1093/rfs/10.4.903

Subjects

free text keywords: Economics and Econometrics, Accounting, Finance, Credit enhancement, Trade credit, Credit history, Credit card interest, Monetary economics, Economics, Credit reference, Credit crunch, business.industry, business, Credit rating, Bond credit rating

Related Organizations