Template-Type: ReDIF-Paper 1.0

Author-Name: Martina Engemann
Author-X-Name-First: Martina
Author-X-Name-Last: Engemann

Author-Name: Katharina Eck
Author-X-Name-First: Katharina
Author-X-Name-Last: Eck

Author-Name: Monika Schnitzer
Author-X-Name-First: Monika
Author-X-Name-Last: Schnitzer

Title: Trade Credits and Bank Credits in International Trade: Substitutes or Complements?
	
Abstract: Trade credits are an important financing tool for internationally active firms. This is surprising, as trade credits are generally more expensive than bank credits and thus a costly substitute for bank financing. In this paper, we investigate the relation between trade credits and bank credits for exporting firms. We develop a theoretical model and show that trade credits convey a quality signal which reduces the risk of the transaction and may thus facilitate obtaining additional bank credits. Thus, for exporters who are not able to obtain bank credits in the first place, trade credits and bank credits are complements. Using panel data on German manufacturing firms, we provide supportive evidence for our theoretical predictions. For financially unconstrained firms, trade credits and bank credits are substitutes. For financially constrained exporters, instead, trade credits have a significantly positive effect on the availability of bank credits.

Length:  38 pages
Creation-Date:  2011-10
File-URL: http://www.bgpe.de/texte/DP/108_EngemannEckSchnitzer.pdf
File-Format: Application/pdf
File-Function: First version, 2011
Number: 108
Classification-JEL: F10, G30
Keywords: Trade Credits, Bank Credits, International Trade, Financial Constraints
Handle: RePEc:bav:wpaper:108_EngemannEckSchnitzer