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The Information Content of Trade CreditNihat AktasSkema Business School Eric De BodtUniversité Lille Nord de France - SKEMA Business School Frédéric LobezUniversité de Lille Nord de France – European Center for Corporate Control Studies Jean-Christophe StatnikUniversité de Lille Nord de France – European Center for Corporate December 3, 2011 Journal of Banking and Finance, Forthcoming Abstract: During 1992–2007, suppliers financed almost 10% of the total assets of U.S. listed firms. This intensive usage of trade credit is puzzling in the light of its high (implicit) costs. By arguing that trade credit use provides valuable information to outside investors, we first derive a theoretical model that predicts a positive correlation between trade credit use and the quality of the firm’s investments. Then, using several proxies for firm’s investment quality (Z-score, return on assets, and long-run abnormal returns), we show that this prediction receives strong support from a large sample of U.S. firms.
Number of Pages in PDF File: 42 Keywords: Trade credit, Signaling, Z-score, Long-run abnormal returns JEL Classification: G32 working papers seriesDate posted: March 15, 2010 ; Last revised: December 22, 2011Suggested CitationContact Information
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