Trade Credit, Bank Credit and Formation of Supply Chains: Can Banks Amplify Contagion Risk?

2016 ◽  
Author(s):  
Andrea Giovannetti
Keyword(s):  
Supply Chains ◽  
Trade Credit ◽  
Bank Credit ◽  
Contagion Risk

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

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.

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.

Credit Shock Propagation Along Supply Chains: Evidence from the CDS Market

2021 ◽  
Author(s):  
Senay Agca ◽  
Volodymyr Babich ◽  
John R. Birge ◽  
Jing Wu
Keyword(s):  
Supply Chain ◽  
Supply Chains ◽  
Trade Credit ◽  
Strong Shock ◽  
Credit Default Swap ◽  
Shock Propagation ◽  
Industry Competition ◽  
Credit Default ◽  
Credit Shocks ◽  
Chain Links

Using a panel of credit default swap (CDS) spreads and supply chain links, we observe that both favorable and unfavorable credit shocks propagate through supply chains in the CDS market. Particularly, the three-day cumulative abnormal CDS spread change (CASC) is 63 basis points for firms whose customers experienced a CDS up-jump event (an adverse credit shock). The value is 74 basis points if their suppliers experienced a CDS up-jump event. The corresponding three-day CASC values are –36 and –38 basis points, respectively, for firms whose customers and suppliers, respectively, experienced an extreme CDS down-jump event (a favorable credit shock). These effects are approximately twice as large for adverse credit shocks originating from natural disasters. Credit shock propagation is absent in inactive supply chains and is amplified if supply chain partners are followed by the same analysts. Industry competition and financial linkages between supply chain partners, such as trade credit and large sales exposure, amplify the shock propagation along supply chains. Strong shock propagation persists through second and third supply chain tiers for adverse shocks but attenuates for favorable shocks. This paper was accepted by Kay Giesecke, finance.

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