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Cited by 2,593Working Capital and Financial PerformanceBanking stability, regulation, efficiencyCorporate Finance and Governance

Trade Credit: Theories and Evidence

Petersen, Mitchell A., Rajan, Raghuram G.·1997·Review of Financial Studies
DOI 10.1093/rfs/10.3.661
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Abstract

Firms may be financed by their suppliers rather than by financial institutions. There are many theories of trade credit, but few comprehensive empirical tests. This article attempts to fill the gap. We focus on small firms whose access to capital markets may be limited and find evidence suggesting that firms use more trade credit when credit from financial institutions is unavailable. Suppliers lend to constrained firms because they have a comparative advantage in getting information about buyers, they can liquidate assets more efficiently, and they have an implicit equity stake in the firms. Finally, firms with better access to credit offer more trade credit.

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Authors
Petersen, M. A., & Rajan, R. G.
Affiliations
  • Northwestern University (US)
  • University of Chicago (US)
Corresponding author
Petersen, Mitchell A.
ORCID
Venue
Review of Financial Studies
Publisher
Oxford University Press (OUP)
Published
1997-07
Volume
10
Issue
3
Pages
661-691
ISSN
  • 0893-9454 (ISSN-L)
  • 1465-7368
DOI
10.1093/rfs/10.3.661
OpenAlex
W3021995853
Cited by
2,593
References
1
Citations by year
2026: 255 · 2025: 218 · 2024: 180 · 2023: 160 · 2022: 140 · 2021: 147 · 2020: 126 · 2019: 131 · 2018: 132 · 2017: 112 · 2016: 103 · 2015: 105 · 2014: 89 · 2013: 102 · 2012: 120
FWCI
71.86
Type
journal article
Language
en
Open access
closed
Locations
  • Review of Financial Studies (publishedVersion)
  • RePEc: Research Papers in Economics (submittedVersion)
Topics
  • Social Sciences › Business, Management and Accounting › Accounting › Working Capital and Financial Performance
  • Social Sciences › Economics, Econometrics and Finance › Finance › Banking stability, regulation, efficiency
  • Social Sciences › Business, Management and Accounting › Accounting › Corporate Finance and Governance
Keywords
trade credit, supplier financing, small business, capital market access, financial constraints, information asymmetry, access to credit

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