The role of trade credit in the recent subprime financial crisis

This study tests firms' financing behavior, especially the causal relation between trade credit and bank credit around the time of the recent subprime financial crises. I find bank credit and accounts payable/receivable are simultaneously determined and there is a substitute/complementary effect between bank credit and accounts payable/receivable. Moreover, I test a cross-sectional response to crisis and find that firms with a more vulnerable financial position (i.e., financially constrained firms) are more likely to be negatively affected by crisis and, in turn, are more likely to cut their supply of credit to customers and increase their use of credit from suppliers.