Trade Credit: Theories and Evidence

  title={Trade Credit: Theories and Evidence},
  author={M. Petersen and R. Rajan},
  journal={Review of Financial Studies},
  • M. Petersen, R. Rajan
  • Published 1997
  • Economics
  • Review of Financial Studies
  • In addition to borrowing from financial institutions, firms may be financed by their suppliers. Although there are many theories explaining why non-financial firms lend money, there are few comprehensive empirical tests of these theories. This paper attempts to fill the gap. We focus on a sample of small firms whose access to capital markets may be limited. We find evidence that firms use trade credit relatively more when credit from financial institutions is not available. Thus while short… CONTINUE READING
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