Bank information monopoly and trade credit: do only banks have information about small businesses?

Daisuke Tsuruta

Applied Economics, 2008, vol. 40, issue 8, 981-996

Abstract: According to previous studies, a bank can set a higher interest rate for small firms by establishing a lending relationship since information asymmetry limits competition between banks. Therefore, the bank can acquire monopoly rent from small firms. However, if small firms can use trade credit which is another financial source, the bank cannot extract monopoly rent. In this article, we examine whether small firms can use trade credit if the bank sets a higher interest rate. Using panel data of small firms in Japan, our analysis shows that when the interest rate the bank sets is too severe or worsened for the borrower, the ratio of trade payables increases and the bank loses its amount of loans. This result implies that trade creditors alleviate the problems of bank information monopolies in Japan.

Date: 2008
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (28)

Downloads: (external link)
http://www.tandfonline.com/doi/abs/10.1080/00036840600771155 (text/html)
Access to full text is restricted to subscribers.

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:taf:applec:v:40:y:2008:i:8:p:981-996

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAEC20

DOI: 10.1080/00036840600771155

Access Statistics for this article

Applied Economics is currently edited by Anita Phillips

More articles in Applied Economics from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().