Trade Credit Research Articles

The Effect of Economic Uncertainty on Access to Finance: An Empirical Examination for European SMEs

This study examines the effect of economic uncertainty on the probability of access to finance for the years between 2015 and 2020. Survey on Access to Finance of Enterprises (SAFE) dataset is used for measuring the level of access to finance and The IMF World Uncertainty Index (WUI) is considered as a proxy for uncertainty. According to probit regression model results, the uncertainty negatively affects the probability of firms’ access to bank loans while positively affecting the likelihood of access to trade credit. The results also reveal that some firm-level and macroeconomic indicators significantly impact access to finance.

Exploring the Dependency of Order Size in Integrated Inventory Model Under Partial Trade Credit and All Unit Discounts with Capacity Constraints

Exploring the Dependency of Order Size in Integrated Inventory Model Under Partial Trade Credit and All Unit Discounts with Capacity Constraints

Exploring the Impact of Trade Credit and Debt on Systemic Risk in the Presence of Financial Distress and Constraints

Based on the extreme value and network contagion theories, this study intends to explore the effects of trade credit, and short/long-term debt on the systemic risk of 205 Pakistani non-financial firms over the period from 2005 to 2021. To evaluate the firms’ systemic contribution and vulnerability, we apply two firm-specific measures, the change in conditional value-at-risk (DCOVAR) and marginal expected shortfall (MES). Our findings reveal a significantly positive impact of trade credit, and short/long-term debt on the systemic contribution and vulnerability of these firms. The findings also indicate that the underlying relationship is significantly moderated by financial distress and financial constraints. Understanding how different forms of debt influence systemic risk can guide policymakers in crafting regulations or interventions to promote a healthier financial environment. Regulators may reevaluate the balance between short/long-term debt usages or develop guidelines for managing trade credit effectively to mitigate systemic risk.

Financing the capital-constrained farmer under random yield and investment information asymmetry: bank credit versus trade credit

PurposeFinancing the capital-constrained farmers to facilitate the production of agri-products is one of the greatest challenges facing the farming supply chain in the developing countries. In this study, we investigate the optimal financing scheme for the farming supply chain under random yield and investment information asymmetry environment to support rural economic development.Design/methodology/approachWe analyze a stylized model of farming supply chain where the capital-constrained farmer produces and sells agri-products through the agribusiness firm, and investigate the optimal financing scheme incorporating the investment information asymmetry and the challenge of yield uncertainty.FindingsThe results show that there is no one financing scheme equilibrium dominates for all situations, the financing scheme equilibrium is affected by the bank’s supervision cost to monitor the farmer’s moral hazard behavior, the variance of random yield and the farmer’s initial capital. The preference of the financing scheme for the agribusiness firm may be different from that for the farmer. The agribusiness firm might suffer from overfinancing problem under trade credit financing when the bank’s supervision cost is larger and the farmer’s own initial capital is lower; the higher variance of random yield will flare up the effect.Practical implicationsThis study sheds light on the choice of financing scheme under random yield and investment information asymmetry environment. This problem is particularly important for developing economies. Financing the capital-constrained farmers not only increases supplies of food and industrial raw materials, but also reduces poverty. The findings provide managerial implications for practitioners for how to leverage different financing scheme to support rural economic development.Originality/valueThis study develops new theoretical model for farming supply chain financing incorporating the challenge of yield uncertainty and investment information asymmetry, the two prominent factors that would impact the financial risk significantly. We analyze the equilibrium under both bank financing and trade credit financing schemes, and the results suggest that the financing scheme equilibrium is affected by the bank’s supervision cost to monitor the farmer’s moral hazard behavior, the variance of random yield and the farmer’s initial capital. The agribusiness firm might suffer from overfinancing problem under trade credit financing.

Aggregate Fluctuations and the Role of Trade Credit

This paper studies the aggregate implications of trade credit in a dynamic, general equilibrium model where heterogeneous entrepreneurs choose their lending and borrowing of trade credit in the presence of financial frictions. Motivated by empirical evidence, the model shows how trade credit flows from less constrained firms to more constrained ones, both in the cross-sectional distribution and in firms' response to heterogeneous financial shocks. In the face of an aggregate financial shock, entrepreneurs reduce their trade credit lending, further tightening their customers' borrowing constraints, resulting in an amplification of the initial shock. In contrast, when the financial shock only affects some, but not all, entrepreneurs, trade credit facilitates the flow of financing to entrepreneurs in financial distress, thereby mitigating its negative impacts. This mechanism, however, is only effective when the shock affects a sufficiently small number of entrepreneurs.

Informal financing access: Can fintech development affect trade credit access?

This paper investigates the relationship between fintech development and corporate trade credit access for Chinese listed companies between 2011 and 2022. The empirical results provide evidence that fintech development is significantly and positively associated with a firm’s access to trade credit. We also demonstrate that information asymmetry is a possible economic channel. In addition, fintech has more pronounced positive effects on the credit trade of non-state-owned enterprises and firms with high financing costs. Our primary findings are not driven by alternative measures and endogeneity concerns.

Exploring the role of trade credit in facilitating low-carbon development: Insights from Chinese enterprises

As the world's largest emitter of carbon, China is proactively addressing climate change in a responsible manner. The country has set an ambitious goal of achieving the most significant reduction in carbon emission intensity globally within approximately 30 years. In light of the transition to a new low-carbon environment, it is imperative that Chinese enterprises assume a more proactive role in embracing carbon neutrality as a social responsibility. The question of how to supplement the green transformation funds that have not yet been covered by green finance has become a significant issue for Chinese enterprises seeking to achieve sustainable development and promote high-quality development. This study employs hand-collected data on companies' carbon emissions from 2018 to 2023, using the fixed effects model to conduct a comprehensive investigation of the role of trade credit embedded within the supply chain in driving the green evolution of Chinese companies and reducing their carbon dioxide emissions. The findings demonstrate that trade credit has a significant impact on reducing CO2 emissions for Chinese businesses while also enhancing their commitment to adopting greener practices, their capacity for investing in green transformation, and the quality of their green outputs. The results of the heterogeneity analysis indicate that the acquisition of trade credit exerts a more pronounced suppressive influence on carbon emissions for heavy-polluting enterprises, non-state-owned enterprises, low-supplier concentration enterprises, and maturity stage enterprises. Similarly, the supply of trade credit notably curtails the carbon emissions for non-heavy polluting enterprises, non-state-owned enterprises, low-medium customer concentration enterprises, and maturity stage enterprises. The empirical findings of this study contribute to reconciling the substantial dilemma between corporate goals for energy conservation, emissions reduction, and production growth. This research offers key insights to support businesses in achieving a gentle transition towards energy efficiency and reduced carbon footprint in line with the overarching trend of sustainable and low-carbon development.

Impacts of Negative Congestion Experiences on Acceptance of Tradable Credits Schemes: Integration of NAM and TPB

Impacts of Negative Congestion Experiences on Acceptance of Tradable Credits Schemes: Integration of NAM and TPB

A Hybrid Fuzzy Mathematical Programming Approach for Manufacturing Inventory Models with Partial Trade Credit Policy and Reliability

This study introduces an inventory model for manufacturing that prioritizes product quality and cost efficiency. Utilizing fuzzy logic and mathematical programming, the model integrates fuzzy numbers to describe uncertainties associated with manufacturing costs and quality control parameters. The model extends beyond conventional inventory systems by incorporating a dynamic mechanism to halt production, employing fuzzy decision variables to optimize the economic order quantity and minimize total costs. Key innovations include the application of approaches related to graded mean integration for defuzzification and the use of Kuhn–Tucker conditions to ensure optimal solutions under complex constraints. These approaches facilitate the precise management of production rates, inventory levels, and cost factors, which are essential in achieving a balance between supply and demand. A computational analysis validates the model’s effectiveness, demonstrating cost reductions while maintaining optimal inventory levels. This underscores the potential of integrating fuzzy arithmetic with traditional optimization techniques to enhance decision making in inventory management. The model’s adaptability and accuracy indicate its broad applicability across various sectors facing similar challenges, offering a valuable tool for operational managers and decision makers to improve efficiency and reduce waste in production cycles.

Correction: Trade credit and loan in capital‑constrained supply chain network design model

Correction: Trade credit and loan in capital‑constrained supply chain network design model

Local credit and international trade

AbstractThis study investigates the relationship between local access to credit and exports. A model of finance‐constrained exporters and bank entry decisions generates trade equations that we estimate with a panel of Brazilian municipal‐level trade and banking data. Literature in the financial development field has struggled to deal with the endogenous relationship between finance and economic outcomes. To untangle this reverse causality, we instrument bank presence by using geographic characteristics particular to the bank branching decision. The results show that local bank access matters: increases in bank branches per person increases bilateral exports and varieties at the city‐ and industry levels. The effect is even stronger for industries where the credit constraint binds, specifically those that use less internal funds and have more difficulty producing collateral.

The tone of earnings communication conferences and trade credit financing of listed companies

Earnings communication conference serves as a key channel for information disclosure in China, providing incremental information to the capital market. Using data from Chinese A-share listed firms from 2007 to 2021, this research reveals that management's tone at the earnings communication conference significantly promotes trade credit financing. Mechanism tests suggest that management's tone facilitates trade credit financing by enhancing information transparency. Further analyses demonstrate that the aforementioned effect is more pronounced for firms facing higher market competition and supplier concentration while lower level of attention from analysts.

Trade Credit and Firm Value: Evidence from Listed SMEs

There is limited past literature on the impact of trade credit on firm value. This study uses a cross-regional sample of listed small and medium-sized enterprises in China, Eurozone and US between 2011 and 2021 to investigate regional differences of trade credit policies and their influence on firm valuation. Using accounts receivables, accounts payables andthe net trade credit position, our empirical study sheds light on the different valuation environments of stock markets in Asia, Europe and North America with the particular regard of trade credit through our definition of inclusive and egoistic firms. Moreover, the internal logical link between the stakeholder value creation behind trade credit and the holistic concept of firm value enriches contemporary debates around shareholder value maximization theory.

Does Advertising Facilitate Supplier-Provided Trade Credit?

Abstract Using the data of non-financial firms from India, the paper finds that firms with large advertising budget tend to receive more trade credit from their suppliers than firms with low advertising budget. The findings are consistent with the assumption that advertising reduces information asymmetries, builds brand image, and improves firm performance. All of these factors facilitate the access to trade credit. The findings of this paper hold after numerous sensitivity checks.

Impact of Days to Receivable on the Profitability of Exporting Coal Companies in Indonesia

This study examines the effects of exchange rates, export intensity, and days to receivable on the profitability of Indonesian coal exporting companies, using panel data from 2015 to 2023. The objective is to find if export intensity and exchange rate impedes the effect of days to receivable on profitability. Interaction analyses reveal that the positive impact of receivables on profitability diminishes with increasing exchange rates. Conversely, the interaction between days to receivable and export intensity does not significantly affect profitability. Therefore, it might be beneficial for Indonesian coal companies should explore implementing more flexible trade credit policies to enhance customer relationships, particularly during periods of rupiah appreciation.

How does informed trading affect credit bond spreads: Evidence from China's interbank bond market

China's interbank bond market is an institutional investor market, and transactions are more information-based. Whether and how informed trading can affect credit bond pricing is an urgent problem to be solved in the study of China's bond asset pricing. This paper uses credit bond issuance and trading data and stock high-frequency trading data from May 2014 to December 2020 to construct informed trading probability and bond liquidity indicators. Using regression analysis and adjustment and mediation effect test methods, this paper studies the impact of informed trading on China's interbank credit bond pricing and the channel role of liquidity. The results show that the probability of informed trading has a significant positive impact on credit bond spreads. Informed trading leads to an increase in credit bond spreads by amplifying bond illiquidity. The amplifying effect of informed trading on credit bond spreads is stronger for bonds with high illiquidity. The amplifying effect of informed trading on credit bond spreads will be stronger in private enterprises, enterprises with low information transparency, and high debt ratios. This study reveals the risk nature of informed trading in China's interbank bond market, which helps to deepen the understanding and management of the bond market.

Does industrial agglomeration curb corporate carbon emissions? A perspective of financial constraints

This paper investigates the impact of industrial agglomeration on corporate carbon emissions in China. We measure the extent of industrial agglomeration utilizing distance-based continuous spatial measurement, differentiating between the quantity and scale of agglomeration. Using a panel of 7895 firm-year observations from 2007 to 2019, our findings indicate that regional industrial agglomeration contributes to a reduction in carbon emissions for firms located within those regions. Specifically, this reduction is primarily achieved through the alleviation of corporate financial constraints. We demonstrate that industrial agglomeration facilitates firms in accessing informal finance (e.g., trade credit) more effectively than formal finance (e.g., bank loans). Additionally, we find that the effect of industrial agglomeration on reducing carbon emissions is more pronounced for firms with higher environmental responsibility, while it is diminished in regions with greater marketization. The carbon reduction effect is also more significant for heavily polluting firms and those situated in areas with stricter environmental regulations. Furthermore, our study reveals that the implementation of green credit policies may weaken the carbon reduction effect of agglomeration by limiting access to financial resources. The robustness of our main results is confirmed through the Bartik-IV test and other robustness checks. Taken together, our findings suggest that industrial agglomeration can effectively lower corporate carbon emissions by easing financial constraints, offering valuable insights into strategies for enhancing corporate environmental performance.

Consolidating building greening: Integrating mobile modular vertical greening systems into prefabricated building

Vertical greening systems increase green plant coverage within built environments, enhancing urban air quality while reducing building energy consumption. But they encounter challenges related to intensive maintenance and significant costs. As a mainstream future building form, the characteristics of modularization and factory customization inherent in prefabricated buildings can effectively address the demands of vertical greening system. This study employs structural equation model and cloud model to examine the feasibility of integrating mobile modular vertical greening system into prefabricated structures, based on a survey of 403 respondents in Shandong Province, China. The study highlights the supportive roles and mediating effects of two maintenance management measures. It confirms the strong correlations between cost control strategies and the successful integration of mobile modular vertical greening system into prefabricated building. The results indicate that integrating intelligent technology and plant-microalgae combined systems are essential exogenous and endogenous maintenance management strategies. They exert a positive influence on prefabricated modular vertical greening systems. A positive interconnection exists between integrating intelligent technology and the plant-microalgae combined system. Carbon credit trading incentive proves more advantageous in reducing mobile modular vertical greening system costs. Plant-microalgae combined system playing a partial mediating role. Although crowdfunding-community participation does not significantly reduce the costs of mobile modular vertical greening system, integrated intelligent technology mediates this relationship. This highlights the indirect role of crowdfunding-community participation in facilitating cost control for these systems.

The Impact of Brexit Disclosure on Trade Credit

The Impact of Brexit Disclosure on Trade Credit

Platform Financing vs. Trade Credit for Lending to Third-Party Sellers

Platform Financing vs. Trade Credit for Lending to Third-Party Sellers