Trade credit and bank finance: Financing small firms in Russia

This paper argues that Russian financial markets are more developed than typically supposed. I show that non-financial firms, suppliers of credit to other firms, support the role of financial intermediaries in helping to surmount problems of information asymmetries. Trade credit works as a signal; firms receiving it obtain access to bank loans. I test this hypothesis using data from my survey of 352 firms in Russia in 1995. Firms using trade credit are shown to have a higher probability of acquiring bank credit. (C) 1999 Elsevier Science Inc.