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Vendor Financing

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Author Info
Brennan, Michael J
Maksimovic, Vojislav
Zechner, Josef

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Abstract

This paper shows that, even in the presence of a perfectly competit ive banking industry, it is optimal for firms with market power to en gage in vendor financing if credit customers have lower reservation prices than cash customers, or if adverse selection makes it infeasible to write credit contracts which separate customers according to their credit risk. The authors analyze how the advantage of vendor financing depends on the relative size of the cash and credit markets, the heterogeneity of credit customers, and in the number of firms in the industry. Copyright 1988 by American Finance Association.

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Publisher Info
Article provided by American Finance Association in its journal Journal of Finance.

Volume (Year): 43 (1988)
Issue (Month): 5 (December)
Pages: 1127-41
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Handle: RePEc:bla:jfinan:v:43:y:1988:i:5:p:1127-41

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  1. Mitchell Berlin, 2003. "Trade credit: why do production firms act as financial intermediaries?," Business Review, Federal Reserve Bank of Philadelphia, issue Q3, pages 21-28. [Downloadable!]
  2. Giuseppe Marotta, 2003. "When do trade credit discounts matter? Evidence from Italian firm-level data," Heterogeneity and monetary policy 0303, Universita di Modena e Reggio Emilia, Dipartimento di Economia Politica. [Downloadable!]
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  3. Frederic Boissay & Reint Gropp, 2007. "Trade credit defaults and liquidity provision by firms," Working Paper Series 753, European Central Bank. [Downloadable!]
    Other versions:
  4. Van Horen, Neeltje, 2004. "Trade Credit as a Competitiveness Tool;Evidence from Developing Countries," MPRA Paper 2792, University Library of Munich, Germany, revised Mar 2005. [Downloadable!]
  5. Daniel Aaronson & Paul Huck & Robert Townsend, 2000. "Small-business access to trade credit: some evidence of ethnic differences," Consumer and Community Affairs Policy Studies 2000-2, Federal Reserve Bank of Chicago. [Downloadable!]
    Other versions:
  6. Ellingsen, Tore, 1998. "Payments in Kind," Working Paper Series in Economics and Finance 244, Stockholm School of Economics, revised 10 Feb 2000. [Downloadable!]
  7. Mike Burkart & Tore Ellingsen, 2004. "In-Kind Finance: A Theory of Trade Credit," American Economic Review, American Economic Association, vol. 94(3), pages 569-590, June. [Downloadable!]
  8. Cyril Monnet & Frederic Boissay, 2004. "Bankruptcy in Credit Chains," Econometric Society 2004 North American Winter Meetings 133, Econometric Society. [Downloadable!]
  9. Silvia Giannangeli & Giorgio Fagiolo & Massimo Molinari, 2008. "Financial Structure and Corporate Growth: Evidence from Italian Panel Data," LEM Papers Series 2008/17, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy. [Downloadable!]
  10. Marion Kohler & Erik Britton & Tony Yates, . "Trade credit and the monetary transmission mechanism," Bank of England working papers 115, Bank of England. [Downloadable!]
  11. Martin Boyer & Karine Gobert, 2007. "The Impact of Switching Costs on Vendor Financing," Cahiers de recherche 07-18, Departement d'Economique de la Faculte d'administration à l'Universite de Sherbrooke. [Downloadable!]
  12. Frederic Boissay, 2006. "Credit chains and the propagation of financial distress," Working Paper Series 573, European Central Bank. [Downloadable!]
  13. John Krainer, 2000. "The separation of banking and commerce," Economic Review, Federal Reserve Bank of San Francisco, pages 15-24. [Downloadable!]
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  14. Daniel Aaronson & Raphael Bostic & Paul Huck & Robert Townsend, 2000. "Supplier relationships and small business use of trade credit," Working Paper Series WP-00-28, Federal Reserve Bank of Chicago. [Downloadable!]
    Other versions:
  15. Yungsan Kim & Woon Gyu Choi, 2003. "Trade Credit and the Effect of Macro-Financial Shocks: Evidence from U.S. Panel Data," IMF Working Papers 03/127, International Monetary Fund. [Downloadable!]
  16. Bastos, Rafael & Pindado, Julio, 2005. "An Agency Model for Trade Credit Policy," Documentos de Trabajo "Nuevas Tendencias en Dirección de Empresas". Working Papers "New Trends on Business Administration". 2005-03, Interuniversitary Doctorate Program "New Trends on Business Administration", Universities of Valladolid, Burgos and Salamanca (Spain). Programa de Doctorado Interuniversitario "Nuevas Tendencias en Di. [Downloadable!]
  17. Cunningham, Rose, 2005. "Trade Credit and Credit Rationing in Canadian Firms," Economic Analysis (EA) Research Paper Series 2005036e, Statistics Canada, Analytical Studies Branch. [Downloadable!]
  18. Daniela Fabbri & Anna Maria Cristina Menichini, 2005. "In kind finance, collateral and cheap trade credit," CSEF Working Papers 146, Centre for Studies in Economics and Finance (CSEF), University of Salerno, Italy, revised 01 Mar 2006. [Downloadable!]
  19. Mitchell A. Petersen & Raghuram G. Rajan, 1996. "Trade Credit: Theories and Evidence," NBER Working Papers 5602, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  20. Iichiro Uesugi & Guy M. Yamashiro, 2004. "How Trade Credit Differs from Loans: Evidence from Japanese Trading Companies," Discussion papers 04028, Research Institute of Economy, Trade and Industry (RIETI). [Downloadable!]
  21. Mehdi Nekhili, 1999. "Le choix du type et de la maturité de la dette par les firmes françaises," Working Papers FARGO 0990901, Université de Bourgogne - LEG/Fargo (Research center in Finance,organizational ARchitecture and GOvernance). [Downloadable!]
    Other versions:
  22. Vicente Cuñat, 2002. "Trade Credit: Suppliers as Debt Collectors and Insurance Providers," Economics Working Papers 625, Department of Economics and Business, Universitat Pompeu Fabra, revised Feb 2004. [Downloadable!]
    Other versions:
  23. Burkart, Mike & Ellingsen, Tore, 2002. "In-Kind Finance," CEPR Discussion Papers 3536, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
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This page was last updated on 2008-11-26.


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