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Factors for Trade Debts of Firms and Possibilities of Reduction of Interfirm Indebtedness (Bulgarian)

  • Galya Taseva
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    The article highlights the basic theoretical principles for firm financing with trade credit and the results of empirical research by the method of multiple regression analysis of factors, influencing the level of trade indebtedness of Bulgarian non-financial enterprises. Models are constructed that have been tested for two consecutive years, separately for SME and for big enterprises that allow incorporation in the analysis of the distinctions between them, including the access to institutional financing, the quality of management etc. Some of the main conclusions of the investigation are that trade credit is a substitute for institutional financing and that firms take trade credits from other firms to finance their own trade receivables and to hedge the risk. Together with the risky management of the financial structure of SME this is a prerequisite for generation of chains of arrears. Possibilities for reduction of the interfirm indebtedness and regulation of its size in the future are also formulated.

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    Article provided by Bulgarian Academy of Sciences - Economic Research Institute in its journal Economic Thought.

    Volume (Year): (2012)
    Issue (Month): 6 ()
    Pages: 26-46

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    Handle: RePEc:bas:econth:y:2012:i:6:p:26-46
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    1. 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.
    2. Boissay, Frédéric & Gropp, Reint, 2007. "Trade credit defaults and liquidity provision by firms," Working Paper Series 0753, European Central Bank.
    3. Anne-France Delannay & Laurent Weill, 2004. "The Determinants of Trade Credit in Transition Countries," Economic Change and Restructuring, Springer, vol. 37(3), pages 173-193, 09.
    4. Raghuram G. Rajan & Luigi Zingales, 1994. "What Do We Know About Capital Structure? Some Evidence from International Data," NBER Working Papers 4875, National Bureau of Economic Research, Inc.
    5. Gregor Andrade & Steven N. Kaplan, 1998. "How Costly is Financial (Not Economic) Distress? Evidence from Highly Leveraged Transactions that Became Distressed," Journal of Finance, American Finance Association, vol. 53(5), pages 1443-1493, October.
    6. Cole, Rebel, 2010. "Bank credit, trade credit or no credit: Evidence from the Surveys of Small Business Finances," MPRA Paper 24689, University Library of Munich, Germany, revised 15 Mar 2010.
    7. Carlos A. Molina & Lorenzo A. Preve, 2012. "An Empirical Analysis of the Effect of Financial Distress on Trade Credit," Financial Management, Financial Management Association International, vol. 41(1), pages 187-205, 03.
    8. Smith, Janet Kiholm, 1987. " Trade Credit and Informational Asymmetry," Journal of Finance, American Finance Association, vol. 42(4), pages 863-72, September.
    9. Ferris, J Stephen, 1981. "A Transactions Theory of Trade Credit Use," The Quarterly Journal of Economics, MIT Press, vol. 96(2), pages 243-70, May.
    10. Arup Daripa & Jeffrey Nilsen, 2005. "Subsidizing Inventory: A Theory of Trade Credit and Prepayment," Birkbeck Working Papers in Economics and Finance 0522, Birkbeck, Department of Economics, Mathematics & Statistics.
    11. Simon Johnson & John McMillan & Christopher Woodruff, 2001. "Courts and Relational Contracts," NBER Working Papers 8572, National Bureau of Economic Research, Inc.
    12. Petersen, Mitchell A & Rajan, Raghuram G, 1997. "Trade Credit: Theories and Evidence," Review of Financial Studies, Society for Financial Studies, vol. 10(3), pages 661-91.
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