Is Trade Credit a Sustainable Resource for Medium-Sized Italian Green Companies?

Maria Cristina Arcuri,Raoul Pisani

doi:10.3390/su13052872

Abstract

Medium-sized Enterprises (MEs) are a limited number of Small and Medium-sized Enterprises (SMEs) in EU-28 countries, but they contribute greatly to value added and employment. They are also key to pursuing sustainable local development in terms of green economic growth. Because trade credit is a crucial financial source for SMEs, this article investigates the importance of trade credit for Italian MEs, and particularly for ‘green’ MEs, rather than ‘non-green’ MEs. A panel analysis is applied to 101,250 observations over the period 2010–2019. We find that green MEs rely more on trade credit than non-green MEs. Moreover, trade credit is more important for younger, smaller, less profitable, and less liquid MEs. We further show that a substitution effect between trade and banking credit exists, and that the local development level affects the demand for trade credit. Our results demonstrate that trade credit supports sustainable development more than banking credit. Financial intermediaries should therefore include green parameters in the assessment of the creditworthiness of MEs, and policymakers should consider that trade credit and financial inclusion may be important in pursuing sustainable local development and economic growth.

Highlights

Medium-sized Enterprises (MEs) are a limited number of Small and Medium-sized Enterprises (SMEs) in EU-28 countries, but they contribute greatly to value added and employment
The results show that trade credit supports sustainable development, and can help firms to improve their reputation, signaling firm quality and facilitating access to banking credit for firms with high agency costs [129]
Green enterprises should inform financial intermediaries of their particular characteristics more clearly due to the specific nature of the sector, as is demonstrated by the greater importance of on-the-job training in supporting green human capital, rather than previous work experience and formal education [63]. Both steps are useful objects of future research, but they recall the importance of promoting a dialogue between different actors about the contents and the implications of the green economy for local development policies

Summary

Introduction

Medium-sized Enterprises (MEs) are a limited number of Small and Medium-sized Enterprises (SMEs) in EU-28 countries, but they contribute greatly to value added and employment. The green economy has complex impacts on local development: even in case of industries which seem to take an immediate and direct advantage of green economy policies (such as tourism and agriculture), on closer analysis, a positive impact is possible only when the local economic and government bodies are involved in the change towards the green economy [14,15,16,17,18] These difficulties increase when sustainability is evaluated according to a multi-dimensional approach (as in the case of the EU definition, which relies on economic, environmental, and social dimensions), as recognized in the literature [19]. SMEs are crucial for most national economies in the EU-28: they account for more than 99.8% of all businesses, and generate more than 56% of value added and about 66.6%

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