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 |
|---|---|
| Pages (from-to) | 334-362 |
| Number of pages | 29 |
| Journal | Journal of Business Finance & Accounting |
| Volume | 51 |
| Issue number | 1-2 |
| Early online date | 1 Mar 2023 |
| DOIs | |
| Publication status | Published - 1 Jan 2024 |
Bibliographical note
We thank the editor Marc Deloof and an anonymous referee for their helpful comments. All remaining errors are our own.Publisher Copyright:
© 2023 John Wiley & Sons Ltd.
Keywords
- financial constraints
- informal finance
- inherited trust
- trade credit
