Business, Management and Accounting
4 years ago

Small and large firms turn to trade credit amidst bank loan decline.

Journal of money credit and banking
Trade Credit and the Bank Lending Channel
Jeffrey H. Nilsen

Paper Summary

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The study looked at how small and large firms change their borrowing behavior during economic downturns. Small firms increase trade credit, a type of loan, when bank loans are harder to get. Large firms also use trade credit, especially if they don't have a good credit rating. This shows that more firms struggle to get traditional loans than we thought.