Trade credit, financial intermediary development, and industry growth

About

Countries

Data & Research

Learning

News

Projects & Operations

Publications

Topics

Home > Data & Research > Research > Author Profile > Report Details

Trade credit, financial intermediary development, and industry growth, Volume 1

Author:	Fisman, Raymond; Love, Inessa;	Collection Title:	Policy, Research working paper ; no. WPS 2695
Date Stored:	2001/11/28	Document Date:	2001/10/31
Document Type:	Policy Research Working Paper	Language:	English
Major Sector:	(Historic)Economic Policy	Report Number:	WPS2695
Sub Sectors:	Trade	SubTopics:	Environmental Economics & Policies; International Terrorism & Counterterrorism; Payment Systems & Infrastructure; Economic Theory & Research; Housing Finance; Banks & Banking Reform; Financial Intermediation
Volume No:	1

Summary: Recent empirical work has shown that financial development is important for economic growth, since well-developed financial markets are more effective at allocating capital to firms with high-value projects. This raises the question of whether firms with high return projects in countries with poorly developed financial institutions, are able to draw on alternative sources of capital, to offset the effects of deficient (formal) financial intermediaries. Recent work suggests that implicit borrowing, in the form of trade credit, may provide one such source of funds. Using the methodology of Rajan and Zingales (1998), the authors show that in countries with relatively weak financial institutions, industries with greater dependence on trade credit financing (measured by the ratio of accounts payable to total assets) grow faster than industries that rely less on such credit. Furthermore, consistent with the notion that young firms may not use trade credit, the authors show that most of the effect they report, comes from growth in preexisting firms, rather than from an increase in the number of firms.


Official Documents Official, scanned versions of documents (may include signatures, etc.)
File Type		Description	File Size (mb)

	PDF 34 pages	Official version*	2.38 (approx.)
	Text	Text version**


Light-Weight Documents Lighter (less MB) documents which may or may not be the final, official version
File Type		Description	File Size (mb)

	PDF 29 pages	WPS2695	0.12

* The official version is derived from scanning the final, paper copy of the document and is the official,
archived version including all signatures, charts, etc.

** The text version is the OCR text of the final scanned version and is not an accurate representation of the final text.
It is provided solely to benefit users with slow connectivity.

Permanent URL for this page: http://go.worldbank.org/I3NINFMXT0