Trade credit is created whenever a supplier offers terms that allow the buyer to delay payment. In this paper we document the rich variation in interfirm credit terms and credit policies across industries. We examine empirically the firm's basic credit policy choices: whether to extend credit or to require cash payment; and, if credit is extended, whether to adopt simple net terms or terms with discounts for prompt payment. We also examine determinants of variations in two-part terms. Results are supportive primarily of theories that explain credit terms as contractual solutions to information problems concerning product quality and buyer creditworthiness.TRADE CREDIT HAS IMPORTANT ECONOMIC SIGNIF ICANCE from both micro-and macroeconomic perspectives. During the 1990s vendor financing has accounted for an average $1.5 trillion of the book value of all assets of U.S. corporations and has represented approximately 2.5 times the combined value of all new public debt and primary equity issues during a given year. As a component of the money supply, trade credit, in the form of accounts payable, exceeds the primary money supply~M1! by a factor of 1.5 on average. 1 Clearly, efforts to control economic growth through monetary policy can be confounded by aggregate decisions of businesses to increase or decrease reliance on trade-credit financing.Several recent empirical studies examine determinants of firm reliance on trade credit. 2 These studies model supply and demand for trade credit using financial-statement data~accounts receivable and payable!. 3 However, many aspects of trade-credit practice are unexplored. Most notably, little is known about the types of credit terms~e.g., net 30, 2010 net 30! and credit policies that are observed across firms and industries.

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractWe study corporate philanthropy using an original database that includes firm-level data on dollar giving, giving priorities, governance, and managerial involvement in giving programs. Results provide some support for the theory that giving enhances shareholder value, as firms in the same industry tend to adopt similar giving practices and firms that advertise more intensively also give more to charity. But much of our evidence indicates that agency costs play a prominent role in explaining corporate giving. Firms with larger boards of directors are associated with significantly more cash giving and with the establishment of corporate foundations. Consistent with effective monitoring by creditors, firms with higher debt-to-value ratios give less cash to charities and are less likely to establish foundations. The empirical work considers the impact of industry regulation on giving and controls for state philanthropy laws and fiduciary responsibility laws. Corporate Philanthropic Practices AbstractWe study corporate philanthropy using an original database that includes firm-level data on dollar giving, giving priorities, governance, and managerial involvement in giving programs. Results provide some support for the theory that giving enhances shareholder value, as firms in the same industry tend to adopt similar giving practices and firms that advertise more intensively also give more to charity. But much of our evidence indicates that agency costs play a prominent role in explaining corporate giving. Firms with larger boards of directors are associated with significantly more cash giving and with the establishment of corporate foundations. Consistent with effective monitoring by creditors, firms with higher debt-to-value ratios give less cash to charities and are less likely to establish foundations. The empirical work considers the impact of industry regulation on giving and controls for state philanthropy laws and fiduciary responsibility laws.

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Commonly used trade credit terms implicitly define a high interest rate that operates as an efficient screening device where information about buyer default risk is asymmetrically held. By offering trade credit, a seller can identify prospective defaults more quickly than if financial institutions were the sole providers of short-term financing. The information is valuable in cases where the seller has made nonsalvageable investments in buyers since it enables the seller to take actions to protect svch investments.TRADITIONAL EXPLANATIONS FOR THE widespread use of trade credit fall into two categories. The financing motive holds that capital market imperfections enable sellers to finance buyer purchases at lower cost than financial institutions. Ferris [4] argues that trade credit provides payment flexibility and thus reduces the overall need for buyers and sellers to maintain precautionary balances. Emery [3] contends that noncompetitive rents of financial institutions can be circumvented by sellers and buyers through provision of trade credit. However, the financing motive is not sufficient to explain why small suppliers offer trade credit, the wide cross-sectional variation in terms, or why large buyers often take the "prompt payment discount" late.A second set of explanations is best described as pricing motivations for trade credit provision. Nadiri [ 101 argues that availability of alternative payment terms can increase product demand but does not indicate why the offered terms could not be duplicated by financial institutions. Schwartz and Whitcomb [ 141 argue that trade credit is used to circumvent Robinson-Patman and similar prohibitions on price discrimination. The correctness of this position depends on the charge to users of trade credit exceeding the cost of provision by the seller.' Although the explanation is possible in principle, an empirical question remains as to why variations in actual credit terms appear to be based on product market, rather than buyer, characteristics.The literature also contains analyses of the impact of changing macroeconomic conditions on trade credit terms and aggregate credit flows. Schwartz [13], for example, employs a financing motive for trade credit to conclude that restrictive monetary policy can be partly mitigated by liberalization of trade credit terms by firms with relatively easy access to capital markets. However, a microeconomic for comments on earlier drafts. I also benefited from discussion by participants of the Sloan Workshop, UCLA, and from comments of an anonymous referee. Financial support was provided by the Center for Financial System Research, A.S.U. ' Cost-based price differences are legal under the Robinson-Patman Act (1936). 863 * Textbooks routinely point out the high expense of using trade credit. See, for example, Brealey and Myers 121, p. 640; Van Horne [16], p. 438; Weston and Brigham [17], p. 225. 'The notion that aspects of financial contracts and institutional arrangements can be explained by problems arising from informational asymmetr...

A cohort sample of Ph.D. economists indicates a significant propensity for researchers to select coauthors of the same sex. This gender‐sorting contributes to lower article production for women. Further, we find evidence of bias in academic promotion when single‐authored and coauthored articles carry the same weight in promotion and salary decisions. The evidence explains, in part, why women academics wait longer for promotion and are not as likely to be promoted as men. Among the effects of gender‐sorting is self‐selection of women into larger departments where they are more likely to find colleagues of the same sex.

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The price formation process of JASDAQ IPOs is more transparent than in the United States. The transparency facilitates analysis of important issues in the IPO literature-why offer prices only partially adjust to public information and adjust more fully to negative information, and why adjustments are related to initial returns. The evidence indicates that early price information conveys the underwriter's commitment to compensate investors for acquiring and/or disclosing information. Offer prices reflect pre-IPO market values of public companies and implicit agreements between underwriters and issuers that originate well before the offering. Underadjustment of offer prices is substantially reversed in the aftermarket. Copyright (c) 2009 The American Finance Association.