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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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Subsidizing inventory: a theory of trade credit and prepayment
Arup Daripa,Jeffrey H. Nilsen +1 more
TL;DR: In this article, the authors propose a simple theory of trade credit and prepayment, and show that allowing the downstream firm to pay with a delay, an arrangement known as "trade credit," is precisely the solution to the problem.
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Crowdfunding vs. Bank Financing: Effects of Market Uncertainty and Word-of-Mouth Communication
TL;DR: In this paper, the authors investigated a firm's optimal pricing strategy when launching an innovative product to the market with both market uncertainty and word-of-mouth (WoM) communication.
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Protability, Trade Credit and Institutional Structure of Production
TL;DR: In this paper, the authors use a novel database to construct structure of supply chains for 990 manufacturing companies operating in different sectors of the US economy and present a methodology to measure the vertical position of each manufacturing company in the supply chain.
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Supply chain finance: the role of credit rating and retailer effort on optimal contracts
TL;DR: In this article, the authors consider a supply chain formed by a supplier and a retailer, both capital-constrained that can ask for a loan to a financial institution or resort on their internal reciprocal sources.
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The determinants of trade credit use: the case of the Tanzanian rice market
TL;DR: In this article, the determinants of trade credit demand and supply in this market, using a simultaneous equation modelling approach, were analyzed. But the authors did not consider the impact of trade relations between rice wholesalers and rice retailers in Tanzania.
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.