Are Trade Creditors Relationship Lenders?

Posted: 30 Aug 2006 Last revised: 8 Jun 2017

See all articles by Hirofumi Uchida

Hirofumi Uchida

Kobe University - Graduate School of Business Administration

Gregory F. Udell

Indiana University - Kelley School of Business - Department of Finance

Wako Watanabe

Osaka University - Institute of Social and Economic Research (ISER)

Date Written: 2013

Abstract

Despite the importance of the hypothesis that trade creditors may act as relationship lenders, it has been virtually impossible to directly test this hypothesis because of a lack of data. We attempt to overcome this problem by using a relatively new Japanese database on small and midsized enterprises (SMEs) that contains information on the strength of the buyer-seller relationship. We find some evidence that trade creditors may be relationship lenders. However, we also find evidence that trade creditors may be financial statement lenders. Our results are generally quite sensitive to model specification in both our quantity and terms of credit regressions. Thus, our results can only be viewed as suggestive of the possibility that trade creditors acquire private soft information over time and use this information to set the terms of trade financing.

Keywords: Trade Credit, Relationship Lending, Credit Availability, Information Accumulation, Bank Loan

JEL Classification: G32, G21, L14, L13, L22

Suggested Citation

Uchida, Hirofumi and Udell, Gregory F. and Watanabe, Wako, Are Trade Creditors Relationship Lenders? (2013). Japan and the World Economy, Vol. 25-26, pp.24-38, 2013, Available at SSRN: https://ssrn.com/abstract=926976 or http://dx.doi.org/10.2139/ssrn.926976

Hirofumi Uchida (Contact Author)

Kobe University - Graduate School of Business Administration ( email )

2-1, Rokkodai-cho, Nada-ku
Kobe, 657-8501
Japan
81-78-803-6949 (Phone)

HOME PAGE: http://www.b.kobe-u.ac.jp/~uchida

Gregory F. Udell

Indiana University - Kelley School of Business - Department of Finance ( email )

1309 E. 10th St.
Bloomington, IN 47405
United States

Wako Watanabe

Osaka University - Institute of Social and Economic Research (ISER) ( email )

6-1 Mihogaoka
Ibaraki, Osaka 567-0047
Japan

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