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
Supply Chains, Global Financial Shocks and Firm Behaviour towards Liquidity Needs
Yothin Jinjarak,Yothin Jinjarak +1 more
TL;DR: This paper found that measures of global credit market shocks are negatively associated with trade receivables, trade payables and inventories, conditional on the level of contract intensity in the industries where firms operate.
Journal ArticleDOI
Cheap Trade Credit and Competition in Downstream Markets
TL;DR: In this paper, the authors show that suppliers offer trade credit to high-bargaining-power customers to ease competition in downstream markets in which they have a large number of other clients.
Journal ArticleDOI
Why do firms invest in accounts receivable? An empirical investigation of the Malaysian manufacturing sector
TL;DR: In this paper, the authors investigate the factors that influence Malaysian manufacturing sector investment in accounts receivable (AR), an asset seen by many as one of the riskiest in any company's balance sheet.
Journal ArticleDOI
Does property rights protection affect export quality? Evidence from a property law enactment
TL;DR: Li et al. as mentioned in this paper used the 2007 property law enactment in China as a natural experiment to examine its effect on export quality, and they found that a firm's export quality increases after the law enactment, and the positive effect is more pronounced for non-state-owned private firms and foreign-investor-controlled firms, for firms specializing in trade with middle and low-income countries, and for firms located in regions with better legal and other institutional environment.
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.