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

5 Citations (Scopus)

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
Pages (from-to)334-362
Number of pages29
JournalJournal of Business Finance & Accounting
Volume51
Issue number1-2
Early online date1 Mar 2023
DOIs
Publication statusPublished - 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

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