Obiamaka P. Egbo, Hillary Chijindu Ezeaku


Firms with access to financial institutions credits have been found to extend more trade credits to customers. This is based on the fact that the firm is believed to have more information about the customers compared to external financiers. This conjecture points to the fact that the information advantage which the firm has over the conventional lenders like banks may have been due to regular and repeated interactions with the customers, sometimes on a personal level. Suppliers are more likely to offer more trade credit to customers with whom they have had long business relationship. From the standpoint of extant literature, this paper reviews the nexus between trade credit and firm performance. Based on the reviews, there seem to be a consensus that trade credit is positively related to firm performance. However, monetary policy stance is found to be a key determinant of trade credit supplies. This is because contractionary monetary policies are expected to have effects on trade credit relative to sales and ultimately have implications on firm profitability.


JEL: F10, L20, L22


Article visualizations:

Hit counter



trade credit; firm performance


Adams, P. D., Wyatt, S. B., & Kim, Y. H. (1992). A Contingent Claims Analysis of Trade Credit. Financial Management, 21(3), 95–103.

Ashton, R. K. (1987). Trade Credit and the Economic Order Quantity-a Further Extension. The Journal of the Operational Research Society, 38(9), 841–846.

Atanasova, C. (2007). Access to Institutional use Finance and the use of Trade Credit. Financial Management, 36(1), 49–67.

Bhole, L. M. (1984). Behaviour of Trade Credit: Its Relevance for Monetary Policy. Economic and Political Weekly, 19(9), 380–389.

Biais, B., & Gollier, C. (1997). Trade Credit and Credit Rationing. The Review of Financial Studies, 10(4), 903–937.

Brasch, J. J. (1972). The Role of Trade Credit in Economic Development. Nebraska Journal of Economics and Business, 11(1), 63–67.

Burkart, M., & Ellingsen, T. (2004). In-Kind Finance: A Theory of Trade Credit. The American Economic Review, 94(3), 569–590.

Ferrando, A., & Mulier, K. (2012). Do Firms Use the Trade Credit Channel to Manage Growth? Working Paper Series, (1502), 1–30.

Ferris, J. S. (1981). A Transactions Theory of Trade Credit Use. The Quarterly Journal of Economics, 96(2), 243–270.

Fisman, R., & Love, I. (2003). Trade Credit, Financial Intermediary Development, and Industry Growth. The Journal of Finance, 58(1), 353–374.

Hekman, C. R. (1981). The Effect of Trade Credit on Price and Price Level Comparisons. The Review of Economics and Statistics, 63(4), 526–532.

Junk, P. E. (1964). Monetary Policy and the Extension of Trade Credit. Southern Economic Journal, 30(3), 274–277.

Kapkiya, C., & Mugo, R. (2015). Effect of trade credit on financial performance of small-scale enterprises: Evidence of Eldoret town, Kenya. International Journal of Economics, Commerce and Management, United Kingdom, III(9), 184–189.

Kim, W. S. (2016). Determinants of Corporate Trade Credit: An Empirical Study on Korean Firms. International Journal of Economics and Financial Issues, 6(2), 414–419.

Laumas, G. S. (1975). Trade Credit and the Demand for Money by the Business Sector: Comment. Southern Economic Journal, 42(2), 320–321.

Nadiri, M. I. (1969). The Determinants of Trade Credit in the U.S. Total Manufacturing Secto. Econometrica, 37(3), 408–423.

Nguyen, L. T. U. (2011). Trade credit in the rice market of the Mekong Delta in Vietnam. University of Groningen, SOM Research School, 1–25.

Özlü, P., & Yalçin, C. (2010). The Trade Credit Channel of Monetary Policy Transmission: Evidence from Non-financial Firms in Turkey. Central Bank of the Republic of Turkey, (September), 1–32.

Petersen, M. A., & Rajan, R. G. (1997). Trade Credit: Theories and Evidence. The Review of Financial Studies, 10(3), 661–691.

Schwartz, R. A. (1974). An Economic Model of Trade Credit. The Journal of Financial and Quantitative Analysis, 9(4), 643–657.

Tamari, M. (1970). The Nature of Trade Credit. Oxford Economic Papers, New Series, 22(3), 406–419.

Tamari, M. (1973). The Cost and Use of Trade Credit. Management International Review, 13(1), 93–102.

Zahn, F., & Hosek, W. R. (1973). Impact of Trade Credit on the Velocity of Money and the Market Rate of Interest. Southern Economic Journal, 40(2), 202–209.



  • There are currently no refbacks.

Copyright (c) 2020 Obiamaka P. Egbo, Hillary Chijindu Ezeaku

Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 International License.

The research works published in this journal are free to be accessed. They can be shared (copied and redistributed in any medium or format) and\or adapted (remixed, transformed, and built upon the material for any purpose, commercially and\or not commercially) under the following terms: attribution (appropriate credit must be given indicating original authors, research work name and publication name mentioning if changes were made) and without adding additional restrictions (without restricting others from doing anything the actual license permits). Authors retain the full copyright of their published research works and cannot revoke these freedoms as long as the license terms are followed.

Copyright © 2016 - 2023. European Journal of Economic and Financial Research (ISSN 2501-9430) is a registered trademark of Open Access Publishing GroupAll rights reserved.

This journal is a serial publication uniquely identified by an International Standard Serial Number (ISSN) serial number certificate issued by Romanian National Library. All the research works are uniquely identified by a CrossRef DOI digital object identifier supplied by indexing and repository platforms. All the research works published on this journal are meeting the Open Access Publishing requirements and standards formulated by Budapest Open Access Initiative (2002), the Bethesda Statement on Open Access Publishing (2003) and  Berlin Declaration on Open Access to Knowledge in the Sciences and Humanities (2003) and can be freely accessed, shared, modified, distributed and used in educational, commercial and non-commercial purposes under a Creative Commons Attribution 4.0 International License. Copyrights of the published research works are retained by authors.