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TRADE CREDIT AS QUALITY SIGNAL: AN INTERNATIONAL COMPARISON

Peihwang Wei, Susan M. L. Zee

Open publisher page 12 citations

Abstract

This paper tests the product quality theory of trade credit with 1993 year‐end data for Germany, Japan, United Kingdom, and United States. The results are inconsistent with the transaction and financing theories of trade credit, since the evidence indicates that firms with high sales relative to their assets and firms with larger sizes extend less credit. However, the quality theory of trade credit is not uniformly supported by the data. Moreover, the evidence suggests wide variations of trade credit policies across countries and industries.

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What this paper is about

This paper tests the product quality theory of trade credit with 1993 year‐end data for Germany, Japan, United Kingdom, and United States. The results are inconsistent with the transaction and financing theories of trade credit, since the evidence indicates that firms with high sales relative to their assets and firms with larger sizes extend less credit. However, the quality theory of trade credit is not uniformly supported by the data. Moreover, the evidence suggests wide variations of trade credit policies across countries and industries.

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OpenAlex reports 12 citations for this work. Citation counts describe recorded attention and do not establish research quality.

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Available abstract

This paper tests the product quality theory of trade credit with 1993 year‐end data for Germany, Japan, United Kingdom, and United States. The results are inconsistent with the transaction and financing theories of trade credit, since the evidence indicates that firms with high sales relative to their assets and firms with larger sizes extend less credit. However, the quality theory of trade credit is not uniformly supported by the data. Moreover, the evidence suggests wide variations of trade credit policies across countries and industries.

Key concepts: Trade credit, Quality (philosophy), Business, Credit history, Monetary economics, Economics, Database transaction, Product (mathematics)

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