Determinants of trade credit in the Japanese manufacturing sector

This paper examines the determinants of trade credit in Japanese manufacturing companies. The empirical analysis presents evidence that the volume of trade credit is influenced not only by transactional factors hut also by financial positions. The empirical test reveals that firms' future business prospects affect the volume of trade credit. Notably, for small firms whose liquidity is constrained, nontransactional factors such as an increase in cash Row reduce the need for trade credit. This paper also finds that trade payables act as a complement to bank loans. The quantitative relationship between trade payables and bank loans suggests that when monetary policy works in the financial markets, it also influences the trade-related credit markets.