The information content of trade credit

Nihat Aktas, Eric de Bodt, Frédéric Lobez and Jean-Christophe Statnik

Journal of Banking & Finance, 2012, vol. 36, issue 5, 1402-1413

Abstract: During 1992–2007, suppliers financed almost 10% of the total assets of US listed firms. This intensive usage of trade credit is puzzling in the light of its high (implicit) costs. By arguing that trade credit use provides valuable information to outside investors, we first derive a theoretical model that predicts a positive correlation between trade credit use and the quality of the firm’s investments. Then, using several proxies for firm’s investment quality (Z-score, return on assets, and long-run abnormal returns), we show that this prediction receives strong support from a large sample of US firms.

Keywords: Trade credit; Signaling; Z-score; Long-run abnormal returns (search for similar items in EconPapers)
JEL-codes: G32 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (42)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:36:y:2012:i:5:p:1402-1413

DOI: 10.1016/j.jbankfin.2011.12.001

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