Trade Credit and Bank Credit: Evidence from Taiwan in the Global Financial Crisis

Abstract

This paper tests firms' financing trend that the causal relation between trade credit and bank credit around the time of the global financial crises. We find that greater financial crisis would cause firms to increasingly turn to their suppliers as a source of finance, making greater use of trade credit. Finally, we observed bank credit and trade credit are simultaneously determined and there is a substitute and complementary effect between bank credit and trade credit.