Trade Credit, Bank Credit and Financial Crisis

2010 ◽  
Vol 10 (1) ◽  
pp. 125-147 ◽  
Author(s):  
INESSA LOVE ◽  
RIDA ZAIDI
Keyword(s):  
Financial Crisis ◽  
Trade Credit ◽  
Bank Credit

scholarly journals CREDIT QUALITY AND SUBSTITUTION IN SME FINANCE

2021 ◽  
pp. 2150005
Author(s):  
LARS NORDEN ◽  
STEFAN VAN KAMPEN ◽  
MANUEL ILLUECA
Keyword(s):  
Financial Crisis ◽  
Trade Credit ◽  
Sample Selection ◽  
Bank Credit ◽  
Firm Characteristics ◽  
Credit Quality ◽  
External Finance ◽  
Sme Finance ◽  
Cross Country ◽  
Using Data

We investigate whether and how SMEs’ credit quality influences their substitution of bank credit for trade credit. Using data from the five largest European countries, we find that substitution of bank credit for trade credit decreases during the financial crisis, but it decreases significantly less for ex ante low credit quality firms. We control for pre-crisis or lagged firm characteristics including size and external finance dependence, industry effects, sample selection effects and cross-country heterogeneity. We also find that low credit quality firms increase their absolute and relative trade credit usage significantly more than high credit quality firms during the financial crisis. The effects are consistent across countries and stronger for net trade credit borrowers and financially constrained firms. The evidence highlights how credit quality influences demand-side driven substitution in SME finance.

scholarly journals BANK CREDIT AND TRADE CREDIT AFTER THE FINANCIAL CRISIS: EVIDENCE FROM RURAL GALICIA

2021 ◽  
Vol 22 (3) ◽  
pp. 616-635
Author(s):  
David Peón ◽  
Xulia Guntín
Keyword(s):  
Financial Crisis ◽  
Rural Areas ◽  
Small Firms ◽  
Trade Credit ◽  
Bank Credit ◽  
Strong Impact ◽  
External Finance ◽  
Survival And Growth ◽  
The Impact

Access to external finance is a key challenge for the creation, survival and growth of SMEs. This article delves into the “weak funding” handicap of rural small firms (SEs): the access to bank financing and the substitutive role of trade credit for entrepreneurs in rural areas when they faced bank credit constraints. Considering SEs in Galicia (Spain), a paradigmatic case in Europe of rural areas in demographic decline with a strong impact of the Spanish sovereign and banking crisis of 2008–2012. There’s evidence of firms in rural areas facing a differential negative flow of bank credit during the financial crisis, especially in the manufacturing and construction sectors, that dissipated afterwards. Then, using a panel data approach that considers the determinants of trade credit, the complementary and substitutive hypotheses are tested to estimate the impact of bank credit restrictions over trade credit.

scholarly journals As A Supply Chain Financing Source, Trade Credit and Bank Credit Relationship during Financial Crises from Clustering Point of View

2016 ◽  
Vol 9 (4) ◽  
pp. 45 ◽  
Author(s):  
Cuneyt Sevim ◽  
Aykut Ekiyor ◽  
Ali Tosyali
Keyword(s):  
Supply Chain ◽  
Financial Crisis ◽  
World Bank ◽  
Clustering Analysis ◽  
Trade Credit ◽  
Feature Selection Method ◽  
Point Of View ◽  
Bank Credit ◽  
Supply Chain Financing ◽  
Trade Credits

<p>This paper examines trade credit and bank credit behavior of firms during financial crisis using World Bank Survey dataset that contains detailed data on trade credit utilization of firms. Unlike literature, cluster analysis is used in order to investigate credit behavior of firms during financial crisis. For better clustering results, feature selection method is used to select variables thought to be important on model. When examined the trade and bank credit behavior of clusters that have been formed by using these variables with clustering analysis, it has been found that impact of the crisis on firms in the supply chain is important. It is found that due to demand fall for goods generated by crisis, firms are motivated to give trade credits to their customers in order not to lose them. However, firms need financial support either from the previous link in the supply chain through trade credit or from the financial institutions through bank credit.</p>

scholarly journals Trade Credit Contracts, Theories and their Applications: A Synthesis of the Literature

2020 ◽  
Vol 17 (1) ◽  
pp. 86-91
Author(s):  
Stanley Kojo Dary ◽  
Harvey S. James Jr.
Keyword(s):  
Trade Credit ◽  
Supply And Demand ◽  
Theory Development ◽  
Empirical Support ◽  
Bank Credit ◽  
Level Of Use ◽  
High Incidence ◽  
Methodological Approaches ◽  
Enforcement Mechanisms ◽  
Credit Contracts

The paper studies theories relating to trade credit contracts as well as their applications and limitations, via review and synthesis of the trade credit literature. Using keywords and search phrases, the literature was identified from key economics, business and financedomains. Trade credit contracts are not complex, this can be explained by factors such as shortness of credit period, frequent transactions, proximity and interaction between trading parties, and effective informal enforcement mechanisms. In contrast to the longstanding conception that trade credit is more expensive than bank credit, trade credit is often cheaper than bank credit, hence its high incidence and level of use across countries. The high use of trade credit should warrant some policy attention, particularly trade credit regulation. Theories explaining trade credit are highly interconnected; most of them have received considerable empirical support in both developed and developing countries. The interconnected nature of the trade credit theories should inform methodological approaches to their empirical testing and present an opportunity for comprehensive theory development in the field. Keywords: Trade Credit, Trade Credit Contracts, Trade Credit Theories, Trade Credit Motives, Trade Credit Supply and Demand

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