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When Trade Credit Facilitates Access to Bank Finance

Author : Eric Severin

Publisher :

Page : 31 pages

File Size : 31,1 MB

Release : 2004

Category :

ISBN :

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Book Description

While trade credit is traditionally considered as a substitute for bank loans, recent theoretical papers (e.g. Biais and Gollier (1997)) suggest that bank debt and trade credit can also be considered as two complementary sources of financing. By using US small businesses data (NSSBF 1998), this paper provides an empirical analysis of these hypotheses. The empirical findings are consistent with the hypothesis that trade credit helps firms to improve their reputation. The results show that trade credit can work as a signal about firm's quality and thus facilitates access to bank debt.Keywords: Bank, Trade credit, Informational asymetry.



Does Trade Credit Facilitate Access to Bank Finance? Empirical Evidence from Portuguese and Spanish Small Medium Size Enterprises

Author : Ana Paula Matias Gama

Publisher :

Page : 35 pages

File Size : 12,83 MB

Release : 2016

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ISBN :

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Book Description

This paper examines if trade credit is as a substitute and/or a complement to bank credit in order to assess the existence of credit rationing. Using a panel dataset of 468 and 7019 Portuguese and Spanish small medium size enterprises for the period 1998-2006, and controlling for endogeneity problems by using GMM estimators, the results confirm the existence of credit rationing, since the substitution hypothesis is confirmed. This effect is particularly strong for firms that maintaining an exclusive relationship with one bank, which indicate a greater severity of adverse selection problems for those firms. Although the substitution hypothesis is confirmed, the results also indicate that the substitution and complementary hypothesis are not mutually exclusive, especially for a specific group of firms: the younger and smaller firms. In line with the theories that emphasize the informational role of trade credit, due the informative advantage of suppliers, our empirical results confirm that trade credit allow the younger and smaller firms to improve their reputation, as trade credit reveals the private information of the supplier to the bank, in turn, banks can update their beliefs about customer default risk and agree to increase bank credit.



Does Trade Credit Facilitate Access to Bank Finance? An Empirical Evidence from Portuguese and Spanish Small Medium Size Enterprises

Author : Ana Paula Matias Gama

Publisher :

Page : 23 pages

File Size : 19,10 MB

Release : 2013

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ISBN :

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Book Description

To assess the existence of credit rationing, we examine if trade credit is a substitute and/or a complement to bank credit. Using a data set of Portuguese and Spanish small and medium sized enterprises, and controlling for endogeneity problems by using GMM estimators, our results confirm the existence of credit rationing. This effect is particularly strong for firms that maintain an exclusive relationship with one bank, which indicate a greater severity of adverse selection problems for those firms. However, our results indicate that the substitution and complementary hypothesis are not mutually exclusive, especially for the younger and smaller firms.



Customer Market Power and the Provision of Trade Credit

Author : Neeltje van Horen

Publisher : World Bank Publications

Page : 27 pages

File Size : 23,19 MB

Release : 2007

Category : Access to Finance

ISBN :

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Book Description

Statistics show that the sale of goods on credit is widespread among firms even when they are capital constrained and thus face relatively high costs in providing trade credit. This study provides an explanation for this by arguing that customers who possess strong market power are able to increase their customer surplus by demanding to purchase the goods on credit. This gain in customer surplus increases with the degree of asymmetric information between buyer and seller with respect to product quality. Therefore, firms that are perceived as risky are especially subject to the market power of the customer and have to sell their goods on credit. Using detailed firm-level data from a large number of firms in Eastern Europe and Central Asia, this study finds evidence consistent with this hypothesis. It finds a strong positive correlation between customer market power and trade credit provision. Furthermore, this relationship is especially strong when the supplier is more risky and in countries with limited financial sector development or a weak legal system.



Trade credit, financial intermediary development, and industry growth

Author : Raymond Fisman

Publisher : World Bank Publications

Page : 34 pages

File Size : 45,41 MB

Release : 2001

Category : Credit

ISBN :

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Book Description

Where do firms turn for financing in countries with poorly developed financial markets? One source is trade credit. And where formal financial intermediaries are deficient, industries that rely more on this source of financing grow faster.



The Oxford Handbook of Entrepreneurial Finance

Author : Douglas Cumming

Publisher : OUP USA

Page : 937 pages

File Size : 44,26 MB

Release : 2012-03-22

Category : Business & Economics

ISBN : 0195391241

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Book Description

Provides a comprehensive picture of issues dealing with different sources of entrepreneurial finance and different issues with financing entrepreneurs. The Handbook comprises contributions from 48 authors based in 12 different countries.



UNCITRAL Model Law on Secured Transactions

Author : United Nations Commission on International Trade Law

Publisher :

Page : 96 pages

File Size : 49,99 MB

Release : 2016

Category : Law

ISBN :

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Book Description

The "Model Law" deals with security interests in all types of tangible and intangible movable property, such as goods, receivables, bank accounts, negotiable instruments, negotiable documents,



Trade Finance

Author : Christopher Hare

Publisher : Oxford University Press

Page : 384 pages

File Size : 35,26 MB

Release : 2021-07-01

Category : Law

ISBN : 0192596675

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Book Description

Trade Finance provides a much-needed re-examination of the relevant legal principles and a study of the challenges posed to current legal structures by technological changes, financial innovation, and international regulation. Arising out of the papers presented at the symposium, Trade Finance for the 21st Century, this collection brings together the perspectives of scholars and practitioners from around the globe focusing on core themes, such as reform and the future role of the UCP, the impact of technology on letters of credit and other forms of trade finance, and the rise of alternative forms of financing. The book covers three key fields of trade finance, starting with the challenges to traditional trade financing by means of documentary credit. These include issues related to contractual enforceability, the use of "soft clauses", the doctrine of strict compliance, the fraud exception, the role of the correspondent bank, performance bonds, and conflict of laws problems. The second main area covered by the work is the technological issues and opportunities in trade finance, including electronic bills of exchange, blockchain, and electronically transferable records. The final part of the work considers alternative and complementary trade finance mechanisms such as open account trading, supply-chain financing, the bank payment obligation, and countertrade.



Trade Credit and Bank Credit

Author : Inessa Love

Publisher : World Bank Publications

Page : 34 pages

File Size : 45,42 MB

Release : 2005

Category : Bank loans

ISBN :

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Book Description

"The authors study the effect of financial crises on trade credit in a sample of 890 firms in six emerging economies. They find that although provision of trade credit increases right after the crisis, it consequently collapses in the following months and years. The authors observe that firms with weaker financial position (for example, high pre-crisis level of short-term debt and low cash stocks and cash flows) are more likely to reduce trade credit provided to their customers. This suggests that the decline in aggregate credit provision is driven by the reduction in the supply of trade credit, which follows the bank credit crunch. The results are consistent with the "redistribution view" of trade credit provision, in which bank credit is redistributed by way of trade credit by the firms with stronger financial position to the firms with weaker financial stand "--World Bank web site.



Financing International Trade

Author : James C. Baker

Publisher : Bloomsbury Publishing USA

Page : 221 pages

File Size : 40,48 MB

Release : 2003-10-30

Category : Business & Economics

ISBN : 0313053766

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Book Description

This book examines the U.S. international trade finance system, including the banks that finance trade; the U.S. Export-Import Bank, which guarantees and insures those trade credits; the Foreign Credit Insurance Association, which insures trade credits; the Public Export Funding Corporation, which makes loans to foreign buyers of U.S. exports; and the federal, state, and local agencies and private institutions that facilitate U.S. trade. Major foreign export credit agencies are discussed and compared with the American system, which is the most comprehensive in the world in its facilitation of financing U.S. export trade.