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In-kind finance: a theory of trade credit
Mike Burkart,Tore Ellingsen +1 more
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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
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Local financial development and the trade credit policy of Italian SMEs
Marc Deloof,Maurizio La Rocca +1 more
TL;DR: In this paper, the authors investigated the relation between local financial development and trade credit in an integrated financial market and found that trade credit complements the formal finance of small and medium-sized enterprises (SMEs) at the local level.
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The influence of economic policy uncertainty on corporate trade credit and firm value
TL;DR: This article investigated the relationship between government economic policy uncertainty (EPUE) and trade credit and its value implication for U.S. public firms and found that firms curtail their receivables periods and face shorter payables periods from suppliers during high EPU.
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The choice between bank debt and trade credits in business start-ups
TL;DR: In this paper, the authors investigate the choice between bank debt and trade credit in business start-ups and find that firms in industries with high historical start-up failure rates and entrepreneurs who tend to highly value private benefits of control use less bank debt.
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Managerial professional connections versus political connections: Evidence from firms- access to informal financing resources
TL;DR: In this paper, the authors investigated how managerial professional connections, through executives' membership of an industry association, play a role in helping firms obtain trade credit, while political connections do not.
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The Use of Trade Credit by Public and Private Firms: An Empirical Investigation
TL;DR: The authors show that public firms use significantly less trade credit than private firms, which is consistent with the argument that private firms with greater asymmetric information and credit constraints rely more on supplier financing.
References
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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.