Fan, Haichao; Lai, Edwin L.-C.; Li, Yao Amber - HKUST Institute for Emerging Market Studies (IEMS), … - 2015
This paper presents theory and evidence that tighter credit constrains force firms to produce lower quality. The paper develops a quality sorting model that predicts that tighter credit constraints faced by a firm reduce its optimal prices due to its choice of lower-quality products. Conversely,...