Inherited trust and informal finance

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

*Corresponding author for this work

Research output: Journal PublicationsJournal 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 languageEnglish
JournalJournal of Business Finance & Accounting
DOIs
Publication statusE-pub ahead of print - 1 Mar 2023

Keywords

  • inherited trust
  • trade credit
  • informal finance
  • Financial constraints

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