Trade credit, SMEs and short-run survivorship: what we know and what we would like to know

2018 ◽  
Vol 10 (4) ◽  
pp. 346-362 ◽  
Author(s):  
Belinda Laura Del Gaudio ◽  
Claudio Porzio ◽  
Vincenzo Verdoliva
Keyword(s):  
Trade Credit ◽  
Time Span ◽  
Bank Credit ◽  
Alternative Form ◽  
Substitution Effects ◽  
Content Type ◽  
Firm Financing ◽  
Short Run ◽  
Credit Financing ◽  
The Cost

Purpose The purpose of this paper is to draw the state of the art on the trade credit, one of the most alternative form of firm financing, especially for small- and medium-sized enterprises (SMEs). Design/methodology/approach The present study first reviews the theoretical papers focusing on the raison d’être of trade credit financing. Then the study identifies the empirical research studies in SMEs’ context and summarizes them on the basis of the following drivers: the country and the period analysed, the methodology used, the main findings and the presence of a shock in time span. Findings Findings reveal a discrepancy of results, especially in testing Meltzer’s hypothesis of substitution effects among trade and bank credit. The heterogeneity of results should be driven by lending infrastructure of the country analysed and the presence or not of a shock in time span considered. Financial constraints can reconcile the discrepancy of results. Then, most of the studies analysed are based on the assumption that trade credit is more expensive than bank credit. Originality/value This paper provides valuable conclusion on past and present studies on trade credit. First is providing a rule of the thumb in the reading of empirical evidences. Also researchers and academicians should deal with consideration regarding the cost of trade credit that still appears as a black box. This is an important issue in corporate finance, as it influences the financial decision of firms and it will be useful for conducting a deeper comparison on the alternative cost of firm financing.

Optimal decisions and coordination strategy of a capital-constrained supply chain under customer return and supplier subsidy

2018 ◽  
Vol 13 (2) ◽  
pp. 278-301 ◽  
Author(s):  
Gongbing Bi ◽  
Ping Chen ◽  
Yalei Fei
Keyword(s):  
Supply Chain ◽  
Trade Credit ◽  
Stackelberg Game ◽  
Modeling Framework ◽  
Content Type ◽  
Initial Capital ◽  
Joint Operations ◽  
Fixed Proportion ◽  
Customer Returns ◽  
Credit Financing

Purpose The purpose of the paper is to explore impacts of financing and supplier subsidy on capital-constrained retailer and the value of returns subsidy contract under a situation where the retailer makes joint operations and finance decisions. Design/methodology/approach This paper considers a two-level supply chain, including a retailer and a supplier. Facing problems of capital constraints and even customer returns, the newsvendor-like retailer orders from a well-capitalized supplier. The supplier allows the retailer a delay in payment and provides a subsidy contract to alleviate its problems if it is profitable. Considering their difference of initial capital status, the retailer is assumed to be Follower of Stackelberg Game and the supplier is the Leader. Findings The supplier return subsidy contract has some merits for both of partners in the chain. And it does not coordinate the supply chain when the retailer has enough initial capital; however, when the retailer is capital constrained, it does. In addition, the retailer’s initial capital level significantly affects the supplier’s subsidy decision. Research limitations/implications Return rate is simplified to a fixed proportion of completed demand. In addition, trade credit is only financing source in this paper, and other types of financing methods, such as bank credit, can be taken too. Originality/value This paper first incorporates trade credit financing and customer returns into a modeling framework to investigate the capital-constrained retailer’s joint operations and finance decisions and the value of supplier’s subsidy contract.

The Influence of the Enterprise’s Market Power on its Availability for Trade Credit and Bank Credit Financing - Based on the Empirical Test about the Listed Companies of Electrical Energy

2014 ◽  
Vol 687-691 ◽  
pp. 4794-4798
Author(s):  
Dan Wu ◽  
Yan Luo
Keyword(s):  
Market Power ◽  
Trade Credit ◽  
Empirical Test ◽  
Electrical Energy ◽  
Listed Companies ◽  
Bank Loans ◽  
Bank Credit ◽  
Linear Regression Models ◽  
Trade Credits ◽  
Credit Financing

The paper, sampling the data from A-shares listed companies of electrical energy during the period of 2009 to 2012, checks out the influence of the enterprise’s market power on its capacity for trade credit and bank credit financing. The paper tries to find out the internal relationship among them by building linear regression models of the explained variable, Credit, the explaining variable, MP, and the control variables, SIZE, EBIT, LIQ, CFO, SBA and SBA*MP. In the study, we find that the target customers of trade credits and bank loans are almost enterprises with a high market power.

Determinants of trade credit financing: a dynamic analysis comparing agri-food cooperatives and non-cooperatives

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
MCarmen Martínez-Victoria ◽  
Mariluz Maté-Sanchez-Val
Keyword(s):  
Trade Credit ◽  
Empirical Studies ◽  
Profit Maximization ◽  
Cash Flows ◽  
Partial Adjustment ◽  
Content Type ◽  
Accounts Receivable ◽  
Dynamic Panel Model ◽  
Credit Financing ◽  
General Method Of Moments

PurposeThe particular characteristics of agri-food cooperatives reduce their ability to access external financial resources. The purpose of this paper is to explore the factors influencing the agri-food cooperatives' trade credit operations by measuring their accounts receivable and comparing the results with agri-food investor-owned firms (IOFs).Design/methodology/approachThe authors apply a partial adjustment model (PAM) estimated using a dynamic panel model with a two-step general method of moments (GMM) estimator to a sample of 11,930 Spanish agri-food cooperatives and IOFs for the period 2011–2018.FindingsThe study concludes that cooperatives and IOFs have an accounts receivable target, which they attempt to achieve rapidly. Cooperatives tend to behave as IOFs do, but they present lower adjustment coefficients. This difference seems to be explained by the unique characteristics of cooperatives which set different economic and social goals, not just profit maximization as IOFs. The findings show differences between the financial and commercial purposes of the cooperatives and IOFs as a result of their internal management policies. Larger cooperatives with access to external financial sources, positive cash flows and operational necessities will grant trade credit.Originality/valueThis study gives interesting implications for cooperative managers and policymakers to help them to understand the strategies behind trade credit policies. Previous empirical studies on the agri-food sector are scarce and focus on IOFs without considering the role of trade credit in European cooperatives.

scholarly journals Financing Strategy and Carbon Emission Abatement in a Supply Chain considering Retailers’ Competition

2021 ◽  
Vol 2021 ◽  
pp. 1-19
Author(s):  
Man Yu ◽  
Tuo Li ◽  
Zhanwen Shi
Keyword(s):  
Supply Chain ◽  
Interest Rate ◽  
Carbon Emission ◽  
Trade Credit ◽  
Bank Credit ◽  
Emission Abatement ◽  
Dual Channel ◽  
Financing Channels ◽  
Credit Financing ◽  
Financing Strategy

This paper investigates the issues of financing channels (bank credit financing, trade credit financing, and dual-channel financing) and carbon emission abatement in a supply chain consisting of one capital-constrained manufacturer and two capital-constrained retailers. Compared with bank credit, we find that every member can make more profit under trade credit when only one financing channel is available. When both bank credit and trade credit are available, the retailers’ financing strategy highly depends on the interest rates charged by the creditors. In addition, we also examine the impact of financing channels on emission abatement. It shows that the manufacturer reduces more carbon emissions under trade credit. Interestingly, the emission abatement has nothing to do with trade credit interest rate when retailers only adopt trade credit, whereas it is closely related to trade credit interest rate under dual-channel financing.

scholarly journals Joint financing and ordering decisions in a capital-constrained supply chain with risk preference

2020 ◽  
Author(s):  
Zhiyuan Zhen ◽  
Jing Ru Wang
Keyword(s):  
Supply Chain ◽  
Trade Credit ◽  
Stackelberg Game ◽  
Wholesale Price ◽  
Risk Preference ◽  
Bank Credit ◽  
Risk Averse ◽  
Initial Capital ◽  
Preference Behavior ◽  
Credit Financing

We consider a two-echelon supply chain consisting of one dominant supplier and one capital-constrained retailer. The retailer needs to solve the shortage of working capital either from a bank or from its core supplier, which offers trade credit when it is also beneficial to itself. We assume the retailer is risk-averse behavior and the supplier has different risk preference behaviors that jointly model risk-averse, risk-neutral, and risk-taking. With a wholesale price contract, we incorporate each member’s risk preference behavior into its objective function. Then we derive the optimal decisions in a Stackelberg game under bank credit financing and trade credit financing, respectively. We find that there exists a supplier’s risk preference threshold that distinguishes financing scheme. When the supplier is a relatively higher risk preference, trade credit financing makes both the retailer and the supplier better off and is a unique financing equilibrium. Otherwise, the members prefer bank credit financing . Besides, the supplier with relatively higher risk preference behavior prefers the retailer with a low initial capital as a partner; the supplier with relatively lower risk preference behavior prefers the retailer with a higher initial capital level. The above theoretical results are verified by numerical analysis.

scholarly journals THE NEXUS BETWEEN INVESTMENT AND INTEREST RATE: NEW DIMENSIONS FOR PAKISTAN

2019 ◽  
Vol 58 (1) ◽  
pp. 71-99
Author(s):  
Nooreen Mujahid ◽  
Muhammad Noman ◽  
Nargis
Keyword(s):  
Economic Growth ◽  
Time Series ◽  
Interest Rate ◽  
Economic Activity ◽  
Time Span ◽  
Financial Policies ◽  
Investment Opportunities ◽  
Short Run ◽  
Testing Approach ◽  
The Cost

The nexus between investment and interest rate is always considered essential to analyze the economic activity as these variables are important economic indicators in defining macroeconomic activity. However, the unchanged condition of investment in Pakistan has raised the cost of investment and crates uncertainty in investors. The paper investigates the link between rate of interest and investment to incorporate a new dimension of call money rate that may enhance the investment opportunities in Pakistan, employing time series analysis for the time span of 1973 - 2015. The ARDL Bound Testing Approach and ECM are employed to capture both the long and short-run dynamics of the variables in the model. The results of the study indicate that the call money rate has significant effect on investment and thus on economic growth. Therefore, the preparation and implementation of financial policies may increase the investmentfriendly rate of interest to stimulate economic growth in Pakistan.

scholarly journals EPQ model with learning effect for imperfect quality items under trade-credit financing

2021 ◽  
pp. 10-10
Author(s):  
Mahesh Jayaswal ◽  
Mandeep Mittal ◽  
Isha Sangal ◽  
Rita Yadav
Keyword(s):  
Learning Effect ◽  
Trade Credit ◽  
Defective Items ◽  
Imperfect Quality ◽  
Demand Rate ◽  
Epq Model ◽  
Credit Financing ◽  
Technical Operation ◽  
The Cost ◽  
The Impact

Although high and advanced technologies are used to produce high quality items, some defective items are produced due to an error in technical operation or in maintenance. The defective cost is the expense involving rework, repair and replacement of defective items, and also the cost incurred due to loss of goods quality. The learning function acts as a substantial function for cost diminution. Meanwhile, the impact of learning is an incident which occurs approximately everywhere and enables the workers to carry out new work with better performance after owing repetition over a course of time. Further, a retailer offers buyers an allowable setback time to arrange the money payable to him and no extra fine if money is paid within the allowable financing time period. On the other hand, if the cash is not paid on trade-credit financing period of time, the retailer will charge on remaining cash provided by the buyer after the allowed period. Keeping these facts, we developed an inventory model for imperfect quality items with a learning effect, in which demand rate is assumed as an exponential function of the trade credit period. The expected total profit function is maximized with respect to trade credit financing period under learning effect. A numerical example is illustrated, and a comprehensive sensitivity analysis is depicted to understand the robustness of the model.

Small business debt financing: the effect of lender structural complexity

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Jaume Franquesa ◽  
David Vera
Keyword(s):  
Trade Credit ◽  
Structural Complexity ◽  
Bank Credit ◽  
Community Banks ◽  
Large Measure ◽  
Content Type ◽  
Commercial Lenders ◽  
Nationally Representative ◽  
The Impact ◽  
Sme Financing

PurposeSmall- and medium-sized enterprises (SMEs) depend on a large measure on commercial banks for external capital, and US SMEs are increasingly experiencing bank credit constraints and resorting to costly alternatives. The purpose of this paper is to investigate the impact of lender organizational complexity on SME financing shortfalls. In particular, it examines the credit shortage effects associated with the SME's reliance on bank holding company (BHC) owned, as opposed to independent, lenders.Design/methodology/approachBuilding on agency–theoretic rationales, the authors posit that both hierarchical and horizontal complexity associated with present-day BHC structures will diminish an affiliated bank's ability and willingness to properly underwrite SME credit needs. Consequently, they hypothesize that SMEs whose commercial lenders are BHC affiliates are likely to experience greater credit shortages. This hypothesis was tested using exhaustive financial data from a large and nationally representative sample of US SMEs.FindingsGreater SME reliance on loans from BHC lenders was found to be associated with a greater use of late trade–credit payments. The latter is an expensive form of financing and a generally accepted indicator of shortages in conventional (and cheaper) bank credit.Originality/valueDespite the evolution toward more complex bank organizational forms, especially among community banks, the implications for SME lending are not yet fully understood. This paper's contribution is to offer a first examination of the impact of post-deregulation BHC structures on SME financing shortfalls.

scholarly journals Net trade credit: what are the determinants?

2017 ◽  
Vol 13 (3) ◽  
pp. 246-266 ◽  
Author(s):  
Godfred Adjapong Afrifa ◽  
Ernest Gyapong
Keyword(s):  
Cash Flow ◽  
Design Methodology ◽  
Trade Credit ◽  
Unobserved Heterogeneity ◽  
Bank Credit ◽  
Sales Growth ◽  
Industry Effects ◽  
Content Type ◽  
Operating Cash Flow ◽  
The Uk

Purpose The purpose of this paper is to extend the literature on trade receivables and trade payables by examining the determinants of net trade credit. Design/methodology/approach To do that, a sample of 67,047 firms in the UK with 443,190 firm year observations is used. Findings The results are robust to unobserved heterogeneity and industry effects. The evidence suggests that firms with more inventories, market share and are financially distressed invest less in trade credit. Moreover, higher operating cash flow, annual sales growth, export propensity, access to bank credit and larger firms lead to higher investment in trade credit. Originality/value Additionally, the paper broadens the scope of the literature by analysing the determinants of net trade credit around the financial crisis and industry competitiveness.

A cost model for radio access data networks

Info ◽  
2015 ◽  
Vol 17 (1) ◽  
pp. 39-53 ◽  
Author(s):  
Michail Katsigiannis ◽  
Timo Smura
Keyword(s):  
Energy Cost ◽  
Operating Cost ◽  
Network Evolution ◽  
Data Traffic ◽  
Content Type ◽  
Radio Access ◽  
Long Run ◽  
Short Run ◽  
Network Costs ◽  
The Cost

Purpose – The purpose of this paper is to use basic economic theory to examine the relation between the demanded data traffic and the network costs for several network deployment scenarios and find the most preferable deployment strategy subject to specific constraints in near future (2015-2020). Design/methodology/approach – The paper identifies the cost structure of radio access networks and explicitly models the network costs as a function of data traffic, both in the short-run (current network) and in the long-run (future capacity expansion scenarios). In the short-run model, the operating cost of the current network is calculated, highlighting the energy cost and its dynamics. In the long-run model, assuming unchanged site infrastructure, the cost analysis provides information for decision-making on network evolution. Findings – The results show that the operating cost does not differ significantly from short- to long-run, and the energy cost constitutes a small but remarkable share (around 7 per cent) of total network operating cost. In addition, the paper concludes that the best strategy is not the most cost-efficient strategy but the one which meet the coverage requirements imposed by the regulator when the spectrum is allocated to operators. Finally, the speed of investments in urban regions is driven by the traffic growth, whereas in suburban and rural regions, it is driven by the regulator’s intervention. Originality/value – The paper contributes to the improvement of cost modeling for techno-economics by using economic theory and analyzing the energy consumption. In addition, the paper investigates real cases for mobile operators, and provides useful information for decision-making in network evolution.

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