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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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Trade Credit, Markups, and Relationships
TL;DR: In this paper, the authors show that firms with higher markups supply more trade credit and trade credit use increases in relationship length, as firms often switch from cash in advance to trade credit but rarely away from trade credit.
BookDOI
Mobile Money and Investment by Women Businesses in Sub-Saharan Africa
Asif Islam,Silvia Muzi +1 more
TL;DR: In this paper, the authors explore whether mobile money use by women-owned firms increases their investment in Sub-Saharan Africa, and find that women owned firms that use mobile money to transact with suppliers are more likely to invest.
Journal ArticleDOI
What Determines Collection Rates of Debt Collection Agencies
TL;DR: In this paper, the authors present an estimation of the collection rates of debt collection agencies and investigate potential determinants of the success of these collection success, finding that collection rates are positively related to the exposure at default and to prior debtor-specific collection rates.
Dissertation
The impact of the financial crisis on the working capital of SMEs: a panel data analysis
TL;DR: In this article, the authors examined the financing behavior of small and medium sized enterprises over the business cycle, focusing on the impact of the 2008 financial crisis, using panel data analysis and found that financially weaker firms received significantly more finance in the form of trade credit coinciding with the dramatic reduction of bank credit extended to the private non-financial sector.
Journal ArticleDOI
Determinants of Net Trade Credit: A Panel VAR Approach Based on Industry
TL;DR: In this article, the authors studied the dynamic relationship between dependent variables of trade credit (net trade credit to total assets and net trade credits to sales), and six independent variables (profit margin, liquidity ratio, and the dummies collection, credit, size, and crisis) using panel vector autoregression during the period 2004-2013 considering data from eight European countries, finding that net trade credit is negatively influenced by crises, forcing firms to use it less due to survival effects but imposing higher trade restrictions.
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.