Trade Credit, Financial Intermediary Development, and Industry Growth

Posted: 19 Mar 2003

See all articles by Raymond J. Fisman

Raymond J. Fisman

National Bureau of Economic Research (NBER); Boston University

Inessa Love

World Bank - Development Economics Data Group (DECDG)

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Abstract

Recent work suggests that financial development is important for economic growth, since financial markets more effectively allocate capital to firms with high value projects. For firms in poorly developed financial markets, implicit borrowing in the form of trade credit may provide an alternative source of funds. We show that industries with higher dependence on trade credit financing exhibit higher rates of growth in countries with weaker financial institutions. Furthermore, consistent with barriers to trade credit access among young firms, we show that most of the effect that we report comes from growth in the size of preexisting firms.

Suggested Citation

Fisman, Raymond and Love, Inessa, Trade Credit, Financial Intermediary Development, and Industry Growth. Journal of Finance, Vol. 58, pp. 353-374, 2003. Available at SSRN: https://ssrn.com/abstract=377117

Raymond Fisman (Contact Author)

National Bureau of Economic Research (NBER)

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Boston University ( email )

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Inessa Love

World Bank - Development Economics Data Group (DECDG) ( email )

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Washington, DC 20433
United States

HOME PAGE: http://econ.worldbank.org/staff/ilove

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