Competition and inter-firm credit: Theory and evidence from firm-level data in Indonesia
AbstractUsing firm-level data we investigate the relationship between trade credit and suppliers' market structure and find a [intersection]-shaped relationship between competition and trade credit, with a discontinuous increase in credit provision between monopoly and duopoly. This "big jump" arises because monopolists are more likely to not offer any trade credit than firms in competitive environments. Our model exploits the fundamentally different nature between cash and trade credit sales, arguing that firms are unable to commit ex ante to a trade credit price. We show that monopolists will often sell only on cash, while credit is always provided in competitive environments.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Elsevier in its journal Journal of Development Economics.
Volume (Year): 93 (2010)
Issue (Month): 1 (September)
Contact details of provider:
Web page: http://www.elsevier.com/locate/devec
Trade credit Market structure Competition Indonesia;
Other versions of this item:
- Kyle Hyndman & Giovanni Serio, 2007. "Competition and Inter-Firm Credit: Theory and Evidence from Firm-level Data in Indonesia," Departmental Working Papers 0702, Southern Methodist University, Department of Economics.
- L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
- O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Mitchell A. Petersen & Raghuram G. Rajan, .
"Trade Credit: Theories and Evidence,"
CRSP working papers
322, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
- William Greene, 2004. "Fixed Effects and Bias Due to the Incidental Parameters Problem in the Tobit Model," Econometric Reviews, Taylor and Francis Journals, vol. 23(2), pages 125-147.
- Mitchell A. Petersen & Raghuram G. Rajan, 1994.
"The Effect of Credit Market Competition on Lending Relationships,"
NBER Working Papers
4921, National Bureau of Economic Research, Inc.
- Petersen, Mitchell A & Rajan, Raghuram G, 1995. "The Effect of Credit Market Competition on Lending Relationships," The Quarterly Journal of Economics, MIT Press, vol. 110(2), pages 407-43, May.
- Demirguc-Kunt, Asli & Maksimovic, Vojislav, 2000.
"Funding growth in bank-based and market-based financial systems : evidence from firm level data,"
Policy Research Working Paper Series
2432, The World Bank.
- Demirguc-Kunt, Asli & Maksimovic, Vojislav, 2002. "Funding growth in bank-based and market-based financial systems: evidence from firm-level data," Journal of Financial Economics, Elsevier, vol. 65(3), pages 337-363, September.
- Fisman, Raymond & Love, Inessa, 2001.
"Trade credit, financial intermediary development, and industry growth,"
Policy Research Working Paper Series
2695, The World Bank.
- Raymond Fisman & Inessa Love, 2003. "Trade Credit, Financial Intermediary Development, and Industry Growth," Journal of Finance, American Finance Association, vol. 58(1), pages 353-374, 02.
- Raymond Fisman & Inessa Love, 2002. "Trade Credit, Financial Intermediary Development and Industry Growth," NBER Working Papers 8960, National Bureau of Economic Research, Inc.
- Fafchamps, Marcel, 2000. "Ethnicity and credit in African manufacturing," Journal of Development Economics, Elsevier, vol. 61(1), pages 205-235, February.
- Lee, Yul W. & Stowe, John D., 1993. "Product Risk, Asymmetric Information, and Trade Credit," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 28(02), pages 285-300, June.
- Gul, Faruk & Sonnenschein, Hugo & Wilson, Robert, 1986.
"Foundations of dynamic monopoly and the coase conjecture,"
Journal of Economic Theory,
Elsevier, vol. 39(1), pages 155-190, June.
- Faruk Gul & Hugo Sonnenschein & Robert Wilson, 2010. "Foundations of Dynamic Monopoly and the Coase Conjecture," Levine's Working Paper Archive 232, David K. Levine.
- Biais, Bruno & Gollier, Christian, 1997. "Trade Credit and Credit Rationing," Review of Financial Studies, Society for Financial Studies, vol. 10(4), pages 903-37.
- Brennan, Michael J & Maksimovic, Vojislav & Zechner, Josef, 1988. " Vendor Financing," Journal of Finance, American Finance Association, vol. 43(5), pages 1127-41, December.
- Raymond Fisman & Mayank Raturi, 2004. "Does Competition Encourage Credit Provision? Evidence from African Trade Credit Relationships," The Review of Economics and Statistics, MIT Press, vol. 86(1), pages 345-352, February.
- Petersen, Mitchell A & Rajan, Raghuram G, 1994. " The Benefits of Lending Relationships: Evidence from Small Business Data," Journal of Finance, American Finance Association, vol. 49(1), pages 3-37, March.
- Coase, Ronald H, 1972. "Durability and Monopoly," Journal of Law and Economics, University of Chicago Press, vol. 15(1), pages 143-49, April.
- Mark G. Guzman, 1999.
"Bank structure, capital accumulation and growth: a simple macroeconomic model,"
99-07, Federal Reserve Bank of Dallas.
- Mark G. Guzman, 2000. "Bank structure, capital accumulation and growth: a simple macroeconomic model," Economic Theory, Springer, vol. 16(2), pages 421-455.
- Burkart, Mike & Ellingsen, Tore, 2002.
CEPR Discussion Papers
3536, C.E.P.R. Discussion Papers.
- Rajan, Raghuram G & Zingales, Luigi, 1995.
" What Do We Know about Capital Structure? Some Evidence from International Data,"
Journal of Finance,
American Finance Association, vol. 50(5), pages 1421-60, December.
- Raghuram G. Rajan & Luigi Zingales, 1994. "What Do We Know About Capital Structure? Some Evidence from International Data," NBER Working Papers 4875, National Bureau of Economic Research, Inc.
- Mian, Shehzad L & Smith, Clifford W, Jr, 1992. " Accounts Receivable Management Policy: Theory and Evidence," Journal of Finance, American Finance Association, vol. 47(1), pages 169-200, March.
- Blalock, Garrick & Gertler, Paul J., 2004. "Learning from exporting revisited in a less developed setting," Journal of Development Economics, Elsevier, vol. 75(2), pages 397-416, December.
- 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.
- Robert Marquez, 2002. "Competition, Adverse Selection, and Information Dispersion in the Banking Industry," Review of Financial Studies, Society for Financial Studies, vol. 15(3), pages 901-926.
- Stokey, Nancy L, 1979. "Intertemporal Price Discrimination," The Quarterly Journal of Economics, MIT Press, vol. 93(3), pages 355-71, August.
- John McMillan & Christopher Woodruff, 1999.
"Interfirm Relationships And Informal Credit In Vietnam,"
The Quarterly Journal of Economics,
MIT Press, vol. 114(4), pages 1285-1320, November.
- John McMillan & Christopher Woodruff, 1998. "Interfirm Relationships and Informal Credit in Vietnam," William Davidson Institute Working Papers Series 132, William Davidson Institute at the University of Michigan.
- McMillan, John & Woodruff, Christopher, 1998. "Inter-Firm Relationships and Informal Credit in Vietnam," CEPR Discussion Papers 2036, C.E.P.R. Discussion Papers.
- Beck, Thorsten & Demirguc-Kant, Asl' & Maksimovic, Vojislav, 2003. "Bank competition, financing obstacles, and access to credit," Policy Research Working Paper Series 2996, The World Bank.
- Bulow, Jeremy I, 1982. "Durable-Goods Monopolists," Journal of Political Economy, University of Chicago Press, vol. 90(2), pages 314-32, April.
- Hallward-Driemeier, Mary, 2001. "Firm-level survey provides data on Asia's corporate crisis and recovery," Policy Research Working Paper Series 2515, The World Bank.
- Chamberlain, Gary, 1980. "Analysis of Covariance with Qualitative Data," Review of Economic Studies, Wiley Blackwell, vol. 47(1), pages 225-38, January.
- Maho Shiraishi & Go Yano, 2010. "Trade credit in China in the early 1990s," Economic Change and Restructuring, Springer, vol. 43(3), pages 221-251, August.
- Nakhoda, Aadil, 2012. "The influence of financial leverage of firms on their international trading activities," MPRA Paper 35765, University Library of Munich, Germany.
- Watanabe, Mariko, 2011. "Competition of the mechanisms : how Chinese home appliance firms coped with default risk of trade credit?," IDE Discussion Papers 312, Institute of Developing Economies, Japan External Trade Organization(JETRO).
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wendy Shamier).
If references are entirely missing, you can add them using this form.