Business, Management and Accounting
4 years ago

Trade credit contracts cheaper than bank credit, shaping global trade landscape.

Ghana Journal of Development Studies
Trade Credit Contracts, Theories and their Applications: A Synthesis of the Literature
Stanley Kojo Dary, Harvey S. James

Paper Summary

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Trade credit contracts are not complicated because they involve short credit periods, frequent transactions, and trust between trading partners. Contrary to popular belief, trade credit is often cheaper than bank credit, leading to its widespread use worldwide. The theories behind trade credit have strong empirical support and are interconnected, suggesting the need for comprehensive theory development in this area. This high usage of trade credit calls for policy attention, especially in terms of trade credit regulation.