Is Trade Credit More Expensive than Bank Loans? Evidence from Italian Firm-level Data

Marotta, Giuseppe

doi:10.2139/ssrn.260064

Cited by 29 publications

(37 citation statements)

References 16 publications

(33 reference statements)

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“…The trade credit interest rate increases above the bank rate only if the suppliers are collectively credit rationed. This is our explanation for why trade credit terms are so similar within industries, and so heterogeneous across industries and countries (Chee K. Ng et al, 1999;Guiseppe Marotta, 2001). If firms in a competitive industry differ widely in the degree to which they are credit constrained, we would expect to see some (constrained) firms avoiding to give trade credit and others being very willing to offer it, but not to see firms offering trade credit at different interest rates.…”

Section: Proposition 8: On the Margin The Entrepreneur Is Willing Tomentioning

confidence: 97%

In-Kind Finance: A Theory of Trade Credit

Burkart

Ellingsen

2004

American Economic Review

751

505

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It is typically less profitable for an opportunistic borrower to divert inputs than to divert cash. Therefore, suppliers may lend more liberally than banks. This simple argument is at the core of our contract theoretic model of trade credit in competitive markets. The model implies that trade credit and bank credit can be either complements or substitutes. Among other things, the model explains why trade credit has short maturity, why trade credit is more prevalent in less developed credit markets, and why accounts payable of large unrated firms are more countercyclical than those of small firms.

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Section: Proposition 8: On the Margin The Entrepreneur Is Willing Tomentioning

confidence: 97%

In-Kind Finance: A Theory of Trade Credit

Burkart

Ellingsen

2004

American Economic Review

751

505

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“…5 Country differences are mainly attributed to the characteristics of the underlying contracts. As explained by Marotta (2005), the initial terms of payment are usually longer for instance in Italy, Spain and Portugal with respect to Nordic countries, the availability of discounts is more limited and often there are no penalties for late payments in the former group of countries. Another stylized fact derived from our dataset is that trade credit is more diffused in sectors where there is a physical good involved, although it relates also to provisions of services ( Figure 3).…”

Section: Datamentioning

confidence: 99%

Do firms use the trade credit channel to manage growth?

Ferrando

Mulier

2013

Journal of Banking & Finance

201

185

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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. we show that also the overall conditions of the financial market matter for the importance of the trade credit channel for growth. Terms of use: Documents in

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“…The first is the acquisition of regular information, timely, rich and less costly from borrowers who are primarily clients (Lewellen, McConnell and Scott, 1980;Biais and Gollier, 1997;Jain, 2001;Frank and Maksimovic, 2005), thereby transmitting a signal to other lenders (Cook, 1999;Boissay, 2004;Alphonse, Ducret and Séverin, 2006). From this perspective, trade credit and bank credit do not appear as exclusive financing tools (Meltzer, 1960;Petersen and Rajan, 1997;Kohler, Britton and Yate, 2000;Nilsen, 2002;Bougheas, Mateut and Mizen, 2009) and complementary (Elliehaussen and Wolken, 1993;Marrota, 2001;Burkart and Ellingsen, 2004;Saito and Bandeira, 2010;Vaidya, 2011;Atanasova, 2012). The second is the increased control power due to the risk of future supplies cessation if the customer applies a risky management method (Cunat, 2007) and in case of financial disputes (Jain, 2001).…”

Section: Financial Incentivesmentioning

confidence: 99%

The Determinants of Trade Credit Demand: An Empirical Study from Cameroonian Firms

Guy¹,

Mazra²

2012

IJBM

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Research on trade credit has been growing in recent years, contributing to our understanding of the phenomenon. However, the main problem is probably the impact of the contingent nature of the payment practices used by companies. The purpose of this paper is to address the determinants of trade credit in the Cameroonian context. Based on a sample of 65 Cameroonian companies observed in 2006, the econometric investigations highlight a genuine financial intermediation business close to productive activity. We used a general model incorporating both financial variables, transactional and sociocultural in order to estimate the joint effect of all explanatory variables on the trade credit which is a kind of investment in business relationship. Logistic regression results confirmed the positive and significant correlation between rationing and trade credit. There is also apparent influence of contingency factors on sociocultural commercial time through social capital and ethnicity of trade and investment partners. Moreover the manager share of capital positively influences the duration of the trade credit where as the financial motive is one that mostly influences to the companies' behavior.

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Is Trade Credit More Expensive than Bank Loans? Evidence from Italian Firm-level Data

Cited by 29 publications

References 16 publications

In-Kind Finance: A Theory of Trade Credit

In-Kind Finance: A Theory of Trade Credit

Do firms use the trade credit channel to manage growth?

The Determinants of Trade Credit Demand: An Empirical Study from Cameroonian Firms

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