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Trade credit in Italy: Evidence from individual firm data

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  • Giuseppe Marotta

    (Università di Modena e Reggio Emilia)

Abstract

Interfirm late payments are a hot issue in the EU, as witnessed by the 1998 bills passed in Italy and in the U.K. and by the soon to be approved EU Directive. Comprehensive information, especially on the effective own cost, is however almost absent in the literature. The paper provides the first detailed evidence of the trade debt own cost for the Italian manufacturing firms, arising out of discounts offered and of penalties for late payments. It is shown that, comparing also self-defined bank lending rationed and non rationed firms, interfirm credit received is, if ever, only slightly more expensive than bank credit. Cross-section econometric analysis, besides establishing the greater reactivity of credit received rather than granted to the external funds implicit cost, finds that the discount offered for early payments affects significantly credit granted to buyers. The estimates obtained for the basic specifications are robust when the sample is split according to various criteria; larger firms, probably because less financially constrained, react more strongly to sales reductions via longer credit and debt periods.

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File URL: http://128.118.178.162/eps/fin/papers/0004/0004004.pdf
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Bibliographic Info

Paper provided by EconWPA in its series Finance with number 0004004.

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Length: 37 pages
Date of creation: 29 Jun 2000
Date of revision:
Handle: RePEc:wpa:wuwpfi:0004004

Note: Type of Document - pdf; prepared on windows-acrobat; to print on HPlaser; pages: 37; figures: nonem
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Web page: http://128.118.178.162

Related research

Keywords: trade credit; late payments; credit rationing;

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  1. 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).
  2. 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.
  3. Stephen G. Cecchetti, 1999. "Legal structure, financial structure, and the monetary policy transmission mechanism," Economic Policy Review, Federal Reserve Bank of New York, issue Jul, pages 9-28.
  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.
  5. Anil K Kashyap & Jeremy C. Stein & David W. Wilcox, 1992. "Monetary Policy and Credit Conditions: Evidence From the Composition of External Finance," NBER Working Papers 4015, National Bureau of Economic Research, Inc.
  6. Gregory E. Elliehausen & John D. Wolken, 1993. "The demand for trade credit: an investigation of motives for trade credit use by small businesses," Staff Studies 165, Board of Governors of the Federal Reserve System (U.S.).
  7. 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.
  8. Michel Dietsch, 1998. "Atouts et handicaps du Crédit Client face au Crédit Bancaire," Revue d'Économie Financière, Programme National Persée, vol. 46(2), pages 175-193.
  9. Giuseppe Marotta, 1997. "Does trade credit redistribution thwart monetary policy? Evidence from Italy," Applied Economics, Taylor & Francis Journals, vol. 29(12), pages 1619-1629.
  10. Élisabeth Kremp & Michel Dietsch, 1998. "Le crédit interentreprises bénéficie plus aux grandes entreprises qu'aux PME," Économie et Statistique, Programme National Persée, vol. 314(1), pages 25-37.
  11. 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.
  12. Marotta Giuseppe, 1997. "Il credito commerciale in Italia: una nota su alcuni aspetti strutturali e sulle implicazioni distributive di politica monetaria," L'industria, Società editrice il Mulino, issue 1, pages 193-210.
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