Trade Credit, Corporate Groups, and the Financing of Belgian Firms

Abstract

We investigate the role of trade credit as a source of financing. Using a sample of 661 large non‐financial Belgian firms for the 1989–1991 period, we find that the amount of trade credit a buyer takes is determined by his need for funds and the internally available funds. Trade credit is primarily used to finance short‐term assets. As such, it seems to be an important alternative not only for short‐term bank debt but also for long‐term financial debt, including intragroup debt. We find no evidence that the amount of trade credit taken is influenced by affiliation with the supplier.

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