The signaling role of trade credit: Evidence from a counterfactual analysis

Pasqualina Arca, Gianfranco Atzeni and Luca Deidda

Journal of Corporate Finance, 2023, vol. 80, issue C

Abstract: We quantify the signaling effect of trade credit on bank credit in a sample of US firms. Our identification strategy relies on the signaling model by Biais and Gollier (1997) and accounts for the endogeneity due to the possibility of self-selection and the simultaneity between banks’ and firms’ credit decisions. We find that: (i) firms’ self-select into trade credit; (ii) firms’ decision to use trade credit results in a higher chance of obtaining bank credit and a lower cost than the counterfactual ones they would have faced if not using trade credit.

Keywords: Trade credit; Asymmetric information; Counterfactual; Signaling; Bank credit; Cost of credit; Endogenous switching regression (search for similar items in EconPapers)
JEL-codes: C21 D82 G32 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0929119923000639
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:80:y:2023:i:c:s0929119923000639

DOI: 10.1016/j.jcorpfin.2023.102414

Access Statistics for this article

Journal of Corporate Finance is currently edited by A. Poulsen and J. Netter

More articles in Journal of Corporate Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().