Trade Credit and Bank Relationships: Evidence from Pre-World War I Belgium
27 Pages Posted: 18 Jan 2009
Date Written: January 17, 2009
We investigate the determinants of trade credit granted by suppliers in a historical environment which was characterized by high information asymmetries and strong banks, focusing on the role of bank-firm relationships. Our results, which are based on a unique sample of 535 firm-year observations for 125 listed Belgian firms in four dominant industries in the period 1905-1909, are generally consistent with the financing role of trade credit. They suggest that trade credit was a tool for channeling funds from firms with close bank ties to other firms, which is consistent with findings for contemporary developing countries.
Keywords: Trade credit policies, accounts receivable, bank relationships, pre-World War 1 Belgium
JEL Classification: G32, G21
Suggested Citation: Suggested Citation