Trade credit and bank credit: Evidence from recent financial crises [An article from: Journal of Financial Economics]

This digital document is a journal article from Journal of Financial Economics, published by Elsevier in 2007. The article is delivered in HTML format and is available in your Amazon.com Media Library immediately after purchase. You can view it with any web browser.

Description:
This paper studies the effect of financial crises on trade credit for a sample of 890 firms in six emerging economies. Although the provision of trade credit increases right after a crisis, it contracts in the following months and years. Firms that are financially more vulnerable to crises extend less trade credit to their customers. We argue that the decline in aggregate trade credit ratios is driven by the reduction in the supply of trade credit that follows a bank credit crunch, consistent with the ''redistribution view'' of trade credit provision, whereby bank credit is redistributed via trade credit from financially stronger firms to weaker firms.