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Board of Governors, Federal Reserve System

By Daniel Aaronson, Raphael Bostic, Paul Huck and Robert TownsendDaniel Aaronson, Raphael Bostic, Paul Huck and Robert Townsend

Abstract

The authors thank Ing-Haw Cheng for research assistance. The views expressed are the authors’ and do not necessarily reflect the views of the Federal Reserve Bank of Chicago, the Board of This paper sheds some light on the empirical importance of supplier relationships, including ethnic ties, for the use of trade credit by minority-owned small businesses. Results based on the 1993 National Survey of Small Business Finance (NSSBF) indicate that ethnic differences in the use of trade credit are present after conditioning on an extensive list of control variables. This holds especially for Black-owned businesses, and we find that they use less trade credit, are less likely to take advantage of discounts for early payment, and are more likely to have payments past due. We use neighborhood survey data to explore the importance of supplier relationships for the use of trade credit by Black- and Hispanic-owned businesses. Although Black and Hispanic owners are equally likely to be offered trade credit, the relationship effects vary by ethnicity. Closer relationships with suppliers as measured by ethnic ties and geographical proximity are associated with more trade credit for Hispanic-owned businesses. In contrast, this result does not hold for Black-owned firms

Year: 2000
OAI identifier: oai:CiteSeerX.psu:10.1.1.195.3419
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