The Information Content of Trade Credit

42 Pages Posted: 15 Mar 2010 Last revised: 4 Feb 2015

See all articles by Nihat Aktas

Nihat Aktas

WHU - Otto Beisheim School of Management

Eric de Bodt

NHH-Caltech

Frédéric Lobez

Université de Lille Nord de France – European Center for Corporate Control Studies

Jean-Christophe Statnik

University of Lille II - University of Lille LSMRC & ISA

Date Written: December 3, 2011

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.

Keywords: Trade credit, Signaling, Z-score, Long-run abnormal returns

JEL Classification: G32

Suggested Citation

Aktas, Nihat and de Bodt, Eric and Lobez, Frédéric and Statnik, Jean-Christophe, The Information Content of Trade Credit (December 3, 2011). Journal of Banking and Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1568046 or http://dx.doi.org/10.2139/ssrn.1568046

Nihat Aktas (Contact Author)

WHU - Otto Beisheim School of Management ( email )

Burgplatz 2
Vallendar, 56179
Germany

Eric De Bodt

NHH-Caltech ( email )

18B AVENUE BECHET
Kraainem, 1950
Belgium
+32 475 24 01 69 (Phone)

HOME PAGE: http://www.edebodt.eu

Frédéric Lobez

Université de Lille Nord de France – European Center for Corporate Control Studies ( email )

Lille Cedex, 59020
France

Jean-Christophe Statnik

University of Lille II - University of Lille LSMRC & ISA ( email )

1, rue de Mulhouse
Lille, 59000
France

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