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Inherited trust and informal finance

Author

Listed:
  • Jiaman Xu
  • Jiandong Chen
  • Mengfei Jiang
  • Jiafu An

Abstract

This paper examines the impact of trust on informal financial development. We isolate the inherited component of trust for 19 countries using US census data and relate it to firms’ access to trade credit. We discover that trust disproportionately elevates the use of trade credit by companies that face obstacles to obtaining funds from formal channels. Further analyses show that the effect is more pronounced in finance‐dependent industries and that better access to trade credit promotes sales growth. Our results are robust to alternative samples, different estimations of inherited trust and various model specifications.

Suggested Citation

  • Jiaman Xu & Jiandong Chen & Mengfei Jiang & Jiafu An, 2024. "Inherited trust and informal finance," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 51(1-2), pages 334-362, January.
    • Handle: RePEc:bla:jbfnac:v:51:y:2024:i:1-2:p:334-362
    DOI: 10.1111/jbfa.12694
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

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