Influence of Legal Environment and Banking System on Trade Credit in Private Firms

ABSTRACT Using a firm‐level database covering 52 countries during the period 2004–2021, I investigate how legal institutions and characteristics of banking systems affect the provision of trade credit for private firms. The results show that there is more reliance on trade credit versus short‐term b...

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Bibliographic Details
Published in:Journal of business finance & accounting Vol. 52; no. 4; pp. 1762 - 1783
Main Author: González, Víctor M.
Format: Journal Article
Language:English
Published: Oxford Blackwell Publishing Ltd 01.08.2025
Subjects:
Banking
Banking industry
Banking system
Companies
COVID-19
Credit
Creditors
Debt
Economic crisis
Enforcement
Financing
International finance
International trade
legal environment
Legal institutions
Pandemics
short‐term debt
trade credit
ISSN:0306-686X, 1468-5957
Online Access:Get full text
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Summary:ABSTRACT Using a firm‐level database covering 52 countries during the period 2004–2021, I investigate how legal institutions and characteristics of banking systems affect the provision of trade credit for private firms. The results show that there is more reliance on trade credit versus short‐term bank financing in environments characterized by higher legal enforcement while protection of creditors’ rights has no effect on the relative use of trade credit. As for the influence of the structure of the banking system, the relative use of trade credit, compared to short‐term debt, increases with the weight of bank financing in the country and the existence of restrictions on banks owning and controlling nonfinancial firms. During the global financial crisis, the relative use of trade credit increased, compared to short‐term debt, while it decreased during the COVID‐19 pandemic.
Bibliography:Funding
Ministerio de Ciencia, Innovación y Universidades: MCINN‐23‐PID2022‐140940NB‐I00.
ObjectType-Article-1
SourceType-Scholarly Journals-1
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ISSN:0306-686X
1468-5957
DOI:10.1111/jbfa.12862