How Do Firms Choose Between Intermediary and Supplier Finance?
Version of Record online: 28 MAR 2012
© 2012 Financial Management Association International.
Volume 41, Issue 1, pages 207–228, Spring 2012
How to Cite
Atanasova, C. (2012), How Do Firms Choose Between Intermediary and Supplier Finance?. Financial Management, 41: 207–228. doi: 10.1111/j.1755-053X.2012.01183.x
- Issue online: 28 MAR 2012
- Version of Record online: 28 MAR 2012
This paper examines firms’ short-term financing choices between intermediated loans and trade credit. I test two sets of empirical hypotheses: 1) hypotheses concerning the cross-sectional differences in the level of intermediary finance for firms that use different levels of trade credit and 2) hypotheses concerning the dynamics of trade credit growth. I find strong evidence that for firms with high agency costs, the use of trade credit facilitates access to conventional bank loans. The evidence is consistent with theories based on the signaling role of trade credit provision and suppliers’ liquidation advantage.