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The Interdependence between Trade Credit and Bank Lending: Commitment in Intermediary Firm Relationships

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  • Ana Paula Matias gama
  • Howard Van auken

Abstract

This study investigates the interdependence between trade and bank credit among 468 ortuguese small and medium‐sized enterprises (s). The results show that a single bank relationship is prevalent among ortuguese s, indicating that the proprietary borrower information that banks obtain through their relationship results in an information monopoly that creates a holdup problem and leads to high interest rates. Suppliers that can control their customers' credit risk may provide additional credit and thus help alleviate concerns associated with holdup costs. Trade credit is a viable alternative to short‐term debt, especially when firms' main bank is unwilling to increase its exposure to liquidity constraints.

Suggested Citation

  • Ana Paula Matias gama & Howard Van auken, 2015. "The Interdependence between Trade Credit and Bank Lending: Commitment in Intermediary Firm Relationships," Journal of Small Business Management, Taylor & Francis Journals, vol. 53(4), pages 886-904, October.
    • Handle: RePEc:taf:ujbmxx:v:53:y:2015:i:4:p:886-904
    DOI: 10.1111/jsbm.12115
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    Cited by:

    1. Lu, Yao & Li, Lu & Zhan, Huanqi & Zhan, Minghua, 2024. "Fintech, information heterogeneity, and the regional distribution effects of corporate financing constraints," Economic Modelling, Elsevier, vol. 137(C).
    2. Vivien Lefebvre, 2023. "Trade credit, payment duration, and SMEs’ growth in the European Union," International Entrepreneurship and Management Journal, Springer, vol. 19(3), pages 1313-1340, September.
    3. Maria Cristina Arcuri & Raoul Pisani, 2024. "Access to external credit during COVID-19: evidence from green SMEs in Italy," Review of Managerial Science, Springer, vol. 18(7), pages 1-30, July.

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