We study the relationship between net trade credit and firms' investment levels, focusing on financially distressed firms. First, we introduce a theoretical model to predict the role played by net trade credit as a coordination device differentiating firms by their degree of financial distress....

Trade credit is often extended by suppliers to buyers who often have easier access to external financing. Moreover, many buyers also delay paying their suppliers beyond the agreed due day. Prior literature attributes this phenomenon to quality assurance or buyer's abuse of market power. In this...

We study the role of trade credit in enhancing the resilience of financially constrained firms from 2010 to 2017. Implicit borrowing in trade finance allows financially constrained firms to bridge the financing gap, expand employment by 8.26 per cent, and increase average firm profits...

We exploit the natural experiment of Japan’s opening to international trade to examine how comparative advantage can shape a country’s long-run path towards financial development. In the late 19th century, many of Japan’s prefectures had a natural comparative advantage in silk reeling....

Internationally active firms rely intensively on trade credits even though they are considered particularly expensive. This phenomenon has been little explored so far. Our theoretical analysis shows that trade credits can alleviate financial constraints arising from asymmetric information...

Buyers and suppliers have diverging interests about trade-credit maturities: buyers desire long payment periods as a source of cheap funding, while suppliers prefer swift payments to avoid locking up scarce liquidity in idle assets. A fast-growing financial product innovation - supply-chain...

There is growing evidence that the impact of financial development on economic growth might be non-linear and hump-shaped, exhibiting a turning point. However, such findings are typically established using total finances (mostly: credit), and the apparent non-linear impact of totals can stem...