When do trade credit discounts matter? Evidence from Italian firm-level data
AbstractItalian firms are top users of trade credit in an international comparison. The paper offers some clues to the determinants of this stylised fact exploiting the answers of about 1900 manufacturing firms on a wide range of contractual features, separately for domestic and foreign counterparties. The main finding is that, with the almost totality of commercial transactions made on credit, there is no evidence that trade credit is more expensive than loans. An econometric investigation shows that discounts offered have the expected effect of reducing payment delays only for customers located abroad, where customary credit periods are shorter. The result is consistent with the poor explanatory power of the discounts received for the trade debt period of domestic firms and with the evidence of larger buyers willing to exploit their market power with suppliers.
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Bibliographic InfoPaper provided by Universita di Modena e Reggio Emilia, Dipartimento di Economia Politica in its series Heterogeneity and monetary policy with number 0303.
Length: pages 26
Date of creation: Mar 2003
Date of revision:
Trade credit; Late payments; Credit rationing;
Other versions of this item:
- Giuseppe Marotta, 2005. "When do trade credit discounts matter? Evidence from Italian firm-level data," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 37(4), pages 403-416.
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
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