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What you sell is what you lend? Explaining trade credit contracts

Mariassunta Giannetti, Mike Burkart () and Tore Ellingsen ()

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: We relate trade credit to product characteristics and aspects of bank–firm relationships and document three main empirical regularities. First, the use of trade credit is associated with the nature of the transacted good. In particular, suppliers of differentiated products and services have larger accounts receivable than suppliers of standardized goods and firms buying more services receive cheaper trade credit for longer periods. Second, firms receiving trade credit secure financing from relatively uninformed banks. Third, a majority of the firms in our sample appear to receive trade credit at low cost. Additionally, firms that are more creditworthy and have some buyer market power receive larger early payment discounts.

JEL-codes: G32 (search for similar items in EconPapers)
Date: 2011-04-01
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Published in Review of Financial Studies, 1, April, 2011, 24(4), pp. 1261-1298. ISSN: 0893-9454

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http://eprints.lse.ac.uk/69543/ Open access version. (application/pdf)

Related works:
Journal Article: What You Sell Is What You Lend? Explaining Trade Credit Contracts (2011) Downloads
Working Paper: What You Sell is What You Lend? Explaining Trade Credit Contracts (2004) Downloads
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