Redistributional View of Trade Credit Revisited: Evidence from micro data of Japanese small firms

Author Name OGAWA Kazuo  (Institute of Social and Economic Research, Osaka University) /Elmer STERKEN  (University of Groningen) /TOKUTSU Ichiro  (Kobe University)
Creation Date/NO. June 2009 09-E-029
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This paper investigates the redistributional view of trade credit from the demand side, based on a unique micro data of Japanese small firms where information on transactions of intermediate goods between firms of different size is available. The redistributional hypothesis is tested in two steps. In the first step we examine the relationship of customer dependence on bank loans with a higher proportion of purchases from large suppliers. In the second step we examine the effect of a dependence on large suppliers on trade credit. We find evidence supporting the redistributional hypothesis for solvent customers, but not for debt-overhang customers.