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Firm-bank “Odd Couples” and trade credit: Evidence from Italian SMEs

Author

Listed:
  • Jérémie BERTRAND

    (IESEG School of Management, Finance Department 3, rue de la digue, 59000 Lille - France)

  • Pierluigi MURRO

    (LUISS University, Department of Business and Managemen, Viale Romania, 32 00197 Rome – Italy)

Abstract

We analyze the use of trade credit as a substitute for relationship lending credit when firms cannot otherwise obtain such credit. Using a sample of SMEs from the Survey of Italian Manufacturing Firms, we show that when opaque firms seeking relationship credit encounter transactional banks, they use a greater portion of trade credit. This findings suggest that opaque firms substitute their missing relationship credit with trade credit, because trade creditors are more able to evaluate soft information. The results depend on firm characteristics, the nature of the bank, and the size of the firms’ banking pool.

Suggested Citation

  • Jérémie BERTRAND & Pierluigi MURRO, 2020. "Firm-bank “Odd Couples” and trade credit: Evidence from Italian SMEs," Working Papers 2020-ACF-09, IESEG School of Management.
    • Handle: RePEc:ies:wpaper:f202009
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    More about this item

    Keywords

    Banks; Lending Technologies; Small Business; Trade Credit;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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