Advanced Search
MyIDEAS: Login to save this article or follow this journal

Trade credit and customer relationships

Contents:

Author Info

  • Barbara Summers

    (Accounting & Finance Division, Leeds University Business School, University of Leeds, Leeds LS2 9JT, UK)

  • Nicholas Wilson

    (Credit Management Research Centre, Leeds University Business School, University of Leeds, Leeds LS2 9JT, UK)

Abstract

Trade credit is an important economic phenomenon, and a variety of theories have been put forward to explain the decisions firms make on credit extension. The ways in which credit can be used as a strategic tool to support corporate objectives has not, however, been fully discussed. The results presented here provide some support for the extant theory on trade credit extension and for recent empirical papers in this area (e.g. Ng et al., 1999; Petersen and Rajan, 1994). However, our results suggest that trade credit granting has a set of subtle and complex motivations over and above those predicted by standard theory. In particular trade credit extension can be used as a many-faceted marketing|relationship management tool and|or as a means of signalling information to the market or to specific buyers about the firm, its products and its future prospects|commitment. Much of credit extension can be seen as customer focused; for example, encouraging frequent purchasers which offer the potential for relationship development or accommodating customers' demand for credit to help finance their production period. The requirements|bargaining power of large customers can influence a firm to extend more credit. Firms will vary terms in anticipation of capturing new business, to attract specific customers and in order to achieve specific marketing aims. Copyright © 2003 John Wiley & Sons, Ltd.

Download Info

If 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.
File URL: http://hdl.handle.net/10.1002/mde.1041
File Function: Link to full text; subscription required
Download Restriction: no

Bibliographic Info

Article provided by John Wiley & Sons, Ltd. in its journal Managerial and Decision Economics.

Volume (Year): 24 (2003)
Issue (Month): 6-7 ()
Pages: 439-455

as in new window
Handle: RePEc:wly:mgtdec:v:24:y:2003:i:6-7:p:439-455

Contact details of provider:
Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/7976

Related research

Keywords:

References

References listed on IDEAS
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.:
as in new window
  1. Smith, Janet Kiholm, 1987. " Trade Credit and Informational Asymmetry," Journal of Finance, American Finance Association, American Finance Association, vol. 42(4), pages 863-72, September.
  2. Schwartz, Robert A., 1974. "An Economic Model of Trade Credit," Journal of Financial and Quantitative Analysis, Cambridge University Press, Cambridge University Press, vol. 9(04), pages 643-657, September.
  3. Nadiri, M Ishaq, 1969. "The Determinants of Trade Credit in the U.S. Total Manufacturing Sector," Econometrica, Econometric Society, Econometric Society, vol. 37(3), pages 408-23, July.
  4. Petersen, Mitchell A & Rajan, Raghuram G, 1994. " The Benefits of Lending Relationships: Evidence from Small Business Data," Journal of Finance, American Finance Association, American Finance Association, vol. 49(1), pages 3-37, March.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Ketskeméty, László & Pálinkó, Éva & Szabó, Márta, 2010. "Kereskedelmi hitelt alakító paraméterek a magyarországi feldolgozóipari vállalatok körében
    [Parameters for commercial credit among Hungary's manufacturing companies]
    ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(11), pages 994-1012.
  2. Massimo Omiccioli, 2005. "Trade Credit as Collateral," Temi di discussione (Economic working papers), Bank of Italy, Economic Research and International Relations Area 553, Bank of Italy, Economic Research and International Relations Area.
  3. Astrid K. Chludek, 2011. "A note on the price of trade credit," Managerial Finance, Emerald Group Publishing, Emerald Group Publishing, vol. 37(6), pages 565-574, June.
  4. Werner Bönte & Sebastian Nielen, 2010. "Innovation, Credit Constraints, and Trade Credit: Evidence from a Cross-Country Study," Schumpeter Discussion Papers, Universitätsbibliothek Wuppertal, University Library sdp10005, Universitätsbibliothek Wuppertal, University Library.
  5. Delli Gatti, Domenico & Gallegati, Mauro & Greenwald, Bruce & Russo, Alberto & Stiglitz, Joseph E., 2010. "The financial accelerator in an evolving credit network," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 34(9), pages 1627-1650, September.
  6. Frederic Boissay & Reint Gropp, 2007. "Trade Credit Defaults and Liquidity Provision by Firms," Working Paper Series: Finance and Accounting, Department of Finance, Goethe University Frankfurt am Main 179, Department of Finance, Goethe University Frankfurt am Main.
  7. TSURUTA Daisuke, 2009. "Customer Relationships and the Provision of Trade Credit during a Recession," Discussion papers, Research Institute of Economy, Trade and Industry (RIETI) 09043, Research Institute of Economy, Trade and Industry (RIETI).
  8. Domenico Delli Gatti & Mauro Gallegati & Bruce Greenwald & Alberto Russo & Joseph Stiglitz, 2009. "Business fluctuations and bankruptcy avalanches in an evolving network economy," Journal of Economic Interaction and Coordination, Springer, Springer, vol. 4(2), pages 195-212, November.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:wly:mgtdec:v:24:y:2003:i:6-7:p:439-455. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.