Trade credit versus bank credit: Evidence from corporate inventory financing

Xiaolou Yang

The Quarterly Review of Economics and Finance, 2011, vol. 51, issue 4, 419-434

Abstract: In this study, I introduce capital market imperfections into a structure framework of inventory investments and investigate impacts of trade credit on firms’ inventory dynamics and analyze the relationship between trade credit and bank loans. As a result, firms end up using a mix of trade credit and bank loans. I find that the use of trade credit and bank credit can be either complements or substitutes. During tight monetary periods, trade credit operates mainly as a substitute for bank borrowing while during looser monetary episodes even when the economy is weak, trade credit and bank loans are dominated by a complementary effect.

Keywords: Trade credit; Bank loans; Inventory financing (search for similar items in EconPapers)
JEL-codes: G31 G32 (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (32)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:51:y:2011:i:4:p:419-434

DOI: 10.1016/j.qref.2011.07.001

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