Inherited trust and informal finance

Jiaman XU; Jiandong CHEN; Mengfei JIANG; Jiafu AN

doi:10.1111/jbfa.12694

Inherited trust and informal finance

Jiaman XU, Jiandong CHEN^*, Mengfei JIANG, Jiafu AN

^*Corresponding author for this work

Department of Finance and Insurance

Research output: Journal Publications › Journal Article (refereed) › peer-review

Abstract

This paper examines the impact of trust on informal financial development. We isolate the inherited component of trust for 19 countries using US census data and relate it to firms’ access to trade credit. We discover that trust disproportionately elevates the use of trade credit by companies that face obstacles to obtaining funds from formal channels. Further analyses show that the effect is more pronounced in finance-dependent industries and that better access to trade credit promotes sales growth. Our results are robust to alternative samples, different estimations of inherited trust and various model specifications.

Original language	English
Journal	Journal of Business Finance & Accounting
DOIs	https://doi.org/10.1111/jbfa.12694
Publication status	E-pub ahead of print - 1 Mar 2023

Keywords

inherited trust
trade credit
informal finance
Financial constraints

Access to Document

10.1111/jbfa.12694Licence: Other

https://onlinelibrary.wiley.com/doi/10.1111/jbfa.12694

Cite this

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title = "Inherited trust and informal finance",

abstract = "This paper examines the impact of trust on informal financial development. We isolate the inherited component of trust for 19 countries using US census data and relate it to firms{\textquoteright} access to trade credit. We discover that trust disproportionately elevates the use of trade credit by companies that face obstacles to obtaining funds from formal channels. Further analyses show that the effect is more pronounced in finance-dependent industries and that better access to trade credit promotes sales growth. Our results are robust to alternative samples, different estimations of inherited trust and various model specifications.",

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AU - XU, Jiaman

AU - CHEN, Jiandong

AU - JIANG, Mengfei

AU - AN, Jiafu

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N2 - This paper examines the impact of trust on informal financial development. We isolate the inherited component of trust for 19 countries using US census data and relate it to firms’ access to trade credit. We discover that trust disproportionately elevates the use of trade credit by companies that face obstacles to obtaining funds from formal channels. Further analyses show that the effect is more pronounced in finance-dependent industries and that better access to trade credit promotes sales growth. Our results are robust to alternative samples, different estimations of inherited trust and various model specifications.

AB - This paper examines the impact of trust on informal financial development. We isolate the inherited component of trust for 19 countries using US census data and relate it to firms’ access to trade credit. We discover that trust disproportionately elevates the use of trade credit by companies that face obstacles to obtaining funds from formal channels. Further analyses show that the effect is more pronounced in finance-dependent industries and that better access to trade credit promotes sales growth. Our results are robust to alternative samples, different estimations of inherited trust and various model specifications.

KW - inherited trust

KW - trade credit

KW - informal finance

KW - Financial constraints

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DO - 10.1111/jbfa.12694

M3 - Journal Article (refereed)

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JO - Journal of Business Finance and Accounting

JF - Journal of Business Finance and Accounting

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