This paper investigates how credit rating affects trade credit use in short-term debt financing. Empirical results show that, under information asymmetry in debt market, credit rating plays a key role both as screening device of lender and signaling device of borrower. Hence, credit rating system can mitigate information asymmetry problem, resulting in the improvement of efficiency in allocation of funds in short-term debt market of Korean economy. Interesting and unique empirical results of this paper is the finding of non-linear relationship between credit rating level and trade credit use. Among low-rating firms, the increase in credit rating reduces trade credit use, while, among high-rating firms, the increase in credit rating raises trade credit use in Korean economy. Given that large firms have high credit ratings in Korean economy, the positive relation between credit rating level and trade credit use reflects the possibility of predatory transaction of trade credits. This paper also finds that various characteristics of borrowing firm such as size, financial distress, product characteristics, and industry characteristics are key determinants of trade credit use in short-term debt financing.
Keywords: Asymmetric Information, Credit Rating, Financial Distress, Trade Credit, Short-Term Debt Financing
JEL Classification: G14, G24, G28, G32
자료실
자료실
[2014년 제 4차] Credit Rating and Short-Term Debt Financing: Empiri
작성자 : 관리자
조회수 : 920
게시일 :
2014-12-12