Open AccessPosted Content
In-kind finance: a theory of trade credit
Mike Burkart,Tore Ellingsen +1 more
Reads0
Chats0
TLDR
In this paper, the authors argue that it is typically less profitable for an opportunistic borrower to divert inputs than to divert cash, and that suppliers may lend more liberally than banks.Abstract:
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.read more
Citations
More filters
Journal ArticleDOI
Trade Credit in the Financial Structure of Polish Companies
TL;DR: In this paper, the authors analyse the changes in the financial structures of companies in different sectors in the years 2010-2014 and find that the share of trade credit in the finances of companies is changing slowly and is a big part of a firm's budgets.
Journal ArticleDOI
Small-Medium Enterprises and credit accessibility in Kathmandu Valley
Prem Prasad Silwal,Safrin Mool +1 more
TL;DR: In this paper, the authors present with the factors that affect the credit accessibility of Small Medium Enterprises (SMEs) in Kathmandu valley, based on the structure questionnaire completed by 101 selected SMEs from Kathmandure valley based on convenient sampling.
Dissertation
Trade credit and bank information monopoly: an empirical evidence from portuguese small medium size enterprises
Abstract: According previous studies, a bank can set up a higher interest rate for small company by establishing a lending relationship since information asymmetry limits competition between banks. Therefore, the bank can acquire monopoly rents from small company. However, not only banks, but also suppliers of trade credit acquire information of buyers ́ creditworthiness. This paper investigates how serious is monopoly information for Portuguese SMEs. We investigate if the informed non-financial companies can extend trade credit in order to decrease the monopolistic power of lenders that might lead to hold-up problems, by analyzing companies that obtain funds from just one bank and those who obtain funds from several banks. By using a panel data of 468 Portuguese SMEs for the period of 1998-2006, our results strongly suggest that high interest rates are associated to an increase in the use of trade credit. Furthermore, the findings support the existence of a link between suppliers and customers that take time to build and leads to suppliers help their customers who experience temporary liquidity shocks. Thus, the provision of trade credit alleviates the problem of monopolies information
References
More filters
Journal ArticleDOI
Determinants of corporate borrowing
TL;DR: In this article, the authors predict that corporate borrowing is inversely related to the proportion of market value accounted for by real options and rationalize other aspects of corporate borrowing behavior, such as the practice of matching maturities of assets and debt liabilities.
Posted Content
What Do We Know About Capital Structure? Some Evidence from International Data
Raghuram G. Rajan,Raghuram G. Rajan,Raghuram G. Rajan,Luigi Zingales,Luigi Zingales,Luigi Zingales +5 more
TL;DR: In this paper, the authors investigate the determinants of capital structure choice by analyzing the financing decisions of public firms in the major industrialized countries and find that factors identified by previous studies as important in determining the cross-section of the capital structure in the U.S. affect firm leverage in other countries as well.
MonographDOI
Firms, contracts, and financial structure
TL;DR: In this article, a general model of the firm is developed, and then the financial structure of firms, debt collecting and bankruptcy is analyzed in greater depth, and the authors contribute to contact theory as developed in economic analysis.
Journal ArticleDOI
The Effect of Credit Market Competition on Lending Relationships
TL;DR: The authors showed that the extent of competition in credit markets is important in determining the value of lending relationships and that creditors are more likely to finance credit constrained firms when credit markets are concentrated because it is easier for these creditors to internalize the benefits of assisting the firms.
Journal ArticleDOI
A more complete conceptual framework for SME finance
TL;DR: In this article, the authors propose a more complete conceptual framework for analysis of SME credit availability issues, and emphasize a causal chain from policy to financial structures, which affect the feasibility and profitability of different lending technologies.