Trade Credit or Financial Credit? An International Study of the Choice and Its Influences

Trade credit financing has usually been assumed to be an expensive source of funds. Recent studies, however, suggested that it can be available at either low or no cost. Using an international panel of firms, we provide an empirical answer to this matter. We analyze the type of firms and financial e...

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Bibliographic Details
Published in:Emerging markets finance & trade 2017-01, Vol.53 (10), p.2318-2332
Main Authors: Hill, Matthew D., Kelly, Gary W., Preve, Lorenzo A., Sarria-Allende, Virginia
Format: Article
Language:English
Subjects:
emerging markets
trade credit
trade payables
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Summary:Trade credit financing has usually been assumed to be an expensive source of funds. Recent studies, however, suggested that it can be available at either low or no cost. Using an international panel of firms, we provide an empirical answer to this matter. We analyze the type of firms and financial environments that are associated with a relatively more intense use of financial credit and, consistent with the mainstream literature, we find that trade credit financing is chosen by firms that have more restricted access to financial credit. These results appear to be stronger for firms located in emerging markets.
ISSN:1540-496X
1558-0938
DOI:10.1080/1540496X.2017.1319355