Work

Bank loans vs. trade credit

Year: 2012

Type: article

Abstract: Using a World Bank dataset of Chinese firms, we investigate the relative importance of bank loans and trade credit in promoting firm performance. To deal with possible endogeneity issues, we employ distinct and separable instrumental variables for bank loans and trade credit. We find that access to bank loans is central to improving firm performance and growth, while the availability of trade credit is much less important. Our results suggest that trade credit cannot effectively substitute for bank loans. Overall, our findings suggest the need for further development of China's formal financial institutions, which would enable the non‐state sector to grow much faster than it has grown in recent decades.

Source: Economics of Transition

DOI: 10.1111/j.1468-0351.2012.00439.x

Authors: Julan Du, Yi Lu, Zhigang Tao

Institutions: Chinese University of Hong Kong, National University of Singapore, University of Hong Kong

Language: English

Topic: Working Capital and Financial Performance

Subfield: Accounting

Field: Business, Management and Accounting

Domain: Social Sciences

Open Access status: green

OpenAlex ID: W2111669418

FWCI: 7.428

Cites: 27

Cited by: 30

Related to: 10