The Interdependence between Trade Credit and Bank Lending: Commitment in Intermediary Firm Relationships

Ana Paula Matias gama and Howard Van auken

Journal of Small Business Management, 2015, vol. 53, issue 4, 886-904

Abstract: This study investigates the interdependence between trade and bank credit among 468 ortuguese small and medium‐sized enterprises (s). The results show that a single bank relationship is prevalent among ortuguese s, indicating that the proprietary borrower information that banks obtain through their relationship results in an information monopoly that creates a holdup problem and leads to high interest rates. Suppliers that can control their customers' credit risk may provide additional credit and thus help alleviate concerns associated with holdup costs. Trade credit is a viable alternative to short‐term debt, especially when firms' main bank is unwilling to increase its exposure to liquidity constraints.

Date: 2015
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DOI: 10.1111/jsbm.12115

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