Abstract
We investigate how the availability of bank credit influences how public firms manage their working capital, and particularly those firms that depend more on the availability of such credit. We not only provide an enhanced understanding of what significantly influences corporate working capital management, but also find that on average, reductions (increases) in bank credit was associated with increases (decreases) in both a firm’s current assets and its current liabilities. Further, we find that these responses are very similar for bank dependent and non-bank dependent firms, except in cash holdings and supply chain financing. Overall, our evidence points to the use of trade credit and reverse trade credit as important buffers to changes in the availability of bank credit.
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