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“Interbank Credit Information-Sharing and Trade Credit: Worldwide Evidence”

Kim Jeong Bon

Simon Fraser University & City University of Hong Kong

Abstract: Exploiting the country-level adoption of public credit registries (PCRs), we find that interbank credit information-sharing via PCRs has a positive effect on firms’ use of trade credit. This effect is more pronounced in firms with higher agency costs, less transparent information environments, greater operating uncertainty, and larger credit risks, as well as in countries with weaker legal environments. PCRs with wider coverage, better accessibility, and stronger regulation also exhibit a greater impact on firms’ use of trade credit. Collectively, we provide international evidence suggesting that with interbank credit information-sharing, suppliers delegate monitoring to lending institutions, mitigating suppliers’ concern about customers’ default risks and increasing the supply of and demand for trade credit. Our findings shed fresh light on the determinants of trade credit financing and the role that formal lending institutions play in trade credit contracting.