Business, Management and Accounting
4 years ago

Trade credit crucial for Canadian firms facing bank credit rationing.

1 view
Trade Credit and Credit Rationing in Canadian Firms
Rose Cunningham

Paper Summary

Trade credit is used by medium and low-wealth Canadian firms to help ease bank credit rationing. A study of over 28,000 firms found that medium-wealth firms substitute trade credit for bank credit, while low-wealth firms use both but are constrained in both markets. Few high-wealth firms are unconstrained, and low-wealth, declining, and distressed firms provide more trade credit than healthier firms.

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