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Does Trade Credit Say Anything about banking Credit?

Author

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  • Pablo Cotler

    (Department of Economics, Universidad Iberoamericana, Mexico City. Mexico)

Abstract

Bank penetration in Mexico is one of the lowest in Latin America. Further, quarterly surveys carried-out by the Central Bank show that trade credit is used by a percentage of firms that is twice those that use credit from banks. Notwithstanding such result, there is no empirical work that may help understand what type of firms demand and use trade credit. Using data provided by a recent national survey, we find that the most likely firms to use trade credit are big, formal and with access to banking credit. While our results can not reject the likelihood that credit rationing may be present in the market for trade credit, the use of such financing may not necessarily be considered an indicator of whether some firms may have no access to banking credit.

Suggested Citation

  • Pablo Cotler, 2013. "Does Trade Credit Say Anything about banking Credit?," Working Papers 0113, Universidad Iberoamericana, Department of Economics.
    • Handle: RePEc:uic:wpaper:0113
    as

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    File URL: http://www.iberoeconomia.mx/images/stories/Publicaciones/DocumentosTrabajo/Working_Paper_1_2013_Trade_Credit_Cotler_Mayo2013.pdf
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    References listed on IDEAS

    as
    1. Petersen, Mitchell A & Rajan, Raghuram G, 1997. "Trade Credit: Theories and Evidence," The Review of Financial Studies, Society for Financial Studies, vol. 10(3), pages 661-691.
    2. Emery, Gary W., 1987. "An Optimal Financial Response to Variable Demand," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 22(2), pages 209-225, June.
    3. Lee, Yul W. & Stowe, John D., 1993. "Product Risk, Asymmetric Information, and Trade Credit," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 28(2), pages 285-300, June.
    4. Guido de Blasio, 2005. "Does Trade Credit Substitute Bank Credit? Evidence from Firm‐level Data," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 34(1), pages 85-112, February.
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    Cited by:

    1. Sangeeta Pratap & Carlos Urrutia & Felipe Meza, 2017. "Credit, Misallocation and Productivity Growth: A Disaggregated Analysis," 2017 Meeting Papers 538, Society for Economic Dynamics.
    2. Felipe Meza & Sangeeta Pratap & Carlos Urrutia, 2019. "Credit, Misallocation and Productivity: A Disaggregated Analysis," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 34, pages 61-86, October.

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