The Relationship between Trade Credit and Loans: Evidence from Small Businesses in Japan

Uesugi, Iichiro, Yamashiro, Guy M., International Journal of Business

ABSTRACT

Much of the existing literature on the relationship between trade credit and loans focuses solely on how a reduction in loans affects the use of trade credit. In this paper, we additionally investigate if a reduction in trade credit is offset by an increase in loans. Using a unique firm-level dataset of small Japanese businesses, we find the following: (1) as the lending attitude of financial institutions worsens, firms significantly decrease their use of trade credit, and (2) a reduction in trade credit, due to a decline in sales, leads to a reduction in the amount of loans extended. Our results provide evidence that small firms in Japan view trade credit and loans as …

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Publication information: Article title: The Relationship between Trade Credit and Loans: Evidence from Small Businesses in Japan. Contributors: Uesugi, Iichiro - Author, Yamashiro, Guy M. - Author. Journal title: International Journal of Business. Volume: 13. Issue: 2 Publication date: Spring 2008. Page number: 141+. © 2009 Premier Publishing, Inc. Provided by ProQuest LLC. All Rights Reserved.

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