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When do trade credit discounts matter? Evidence from Italian firm-level data

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Author Info
Giuseppe Marotta ()

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Abstract

Italian 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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File URL: http://www.economia.unimore.it/marotta_giuseppe/murst/discounts.pdf
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Publisher Info
Paper provided by Universita di Modena e Reggio Emilia, Dipartimento di Economia Politica in its series Heterogeneity and monetary policy with number 0303.

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Length: pages 26
Date of creation: Mar 2003
Date of revision:
Handle: RePEc:mod:modena:0303

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Web page: http://www.economia.unimore.it
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Related research
Keywords: Trade credit; Late payments; Credit rationing;

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Find related papers by JEL classification:
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; Capital and Ownership Structure

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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.:
  1. Demirguc-Kunt, Asli & Maksimovic, Vojislav, 2001. "Firms as financial intermediaries - evidence from trade credit data," Policy Research Working Paper Series 2696, The World Bank. [Downloadable!]
  2. Rafael La Porta & Florencio Lopez-de-Silane & Andrei Shleifer & Robert W. Vishny, 1996. "Law and Finance," NBER Working Papers 5661, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  3. Dietmar Harhoff & Timm Körting, 1998. "Lending Relationships in Germany: Empirical Results from Survey Data," CIG Working Papers FS IV 98-06, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG). [Downloadable!]
    Other versions:
  4. Chee K. Ng & Janet Kiholm Smith & Richard L. Smith, 1999. "Evidence on the Determinants of Credit Terms Used in Interfirm Trade," Journal of Finance, American Finance Association, vol. 54(3), pages 1109-1129, 06. [Downloadable!] (restricted)
  5. Nicholas Wilson & Barbara Summers, 2002. "Trade Credit Terms Offered by Small Firms: Survey Evidence and Empirical Analysis," Journal of Business Finance & Accounting, Blackwell Publishing, vol. 29(3&4), pages 317-351. [Downloadable!] (restricted)
  6. Brennan, Michael J & Maksimovic, Vojislav & Zechner, Josef, 1988. " Vendor Financing," Journal of Finance, American Finance Association, vol. 43(5), pages 1127-41, December. [Downloadable!] (restricted)
  7. Petersen, Mitchell A & Rajan, Raghuram G, 1997. "Trade Credit: Theories and Evidence," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 10(3), pages 661-91.
    Other versions:
  8. Jaffee, Dwight & Stiglitz, Joseph, 1990. "Credit rationing," Handbook of Monetary Economics, in: B. M. Friedman & F. H. Hahn (ed.), Handbook of Monetary Economics, edition 1, volume 2, chapter 16, pages 837-888 Elsevier. [Downloadable!] (restricted)
  9. 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. [Downloadable!] (restricted)
  10. Benjamin S. Wilner, 2000. "The Exploitation of Relationships in Financial Distress: The Case of Trade Credit," Journal of Finance, American Finance Association, vol. 55(1), pages 153-178, 02. [Downloadable!] (restricted)
  11. Marotta, Giuseppe, 1997. "Does Trade Credit Redistribution Thwart Monetary Policy? Evidence from Italy," Applied Economics, Taylor and Francis Journals, vol. 29(12), pages 1619-29, December. [Downloadable!] (restricted)
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Cited by:
(explanations, 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.)

  1. Alarcon, Silverio, 2008. "The Role of Trade Credit in the Spanish Agrogood Industry," 2008 International Congress, August 26-29, 2008, Ghent, Belgium 43861, European Association of Agricultural Economists. [Downloadable!]
  2. 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!]
  3. TSURUTA Daisuke, 2009. "Customer Relationships and the Provision of Trade Credit during a Recession," Discussion papers 09043, Research Institute of Economy, Trade and Industry (RIETI). [Downloadable!]
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