IDEAS home Printed from https://ideas.repec.org/a/eee/japwor/v74y2025ics0922142525000143.html
   My bibliography  Save this article

Does SME policy enhance the adjustment of trade credit? Evidence from a revision of the Subcontract Act in Japan

Author

Listed:
  • Tsuruta, Daisuke

Abstract

In this paper, we examine whether small and medium enterprises (SMEs) face severe constraints in adjusting their trade receivables by focusing on the 2016 revision of the Subcontract Act of Japan. Small businesses typically have weaker bargaining power than their customers because they are likely to depend on certain customers. Accordingly, many small businesses face severe constraints in the adjustment of their trade receivables. The Subcontract Act prohibits customer firms from receiving trade credit from small businesses over the long term, and this was enforced more strictly after 2016 following a regulatory revision. This made it easier for small businesses to adjust their trade receivables if their level was considered excessive, serving to enhance the speed of adjustment. We find that trade receivables decreased by an average of 2.1 days following the policy change for the main target firms of the Subcontract Act. Our results also show that small businesses could more rapidly adjust their trade receivables than large firms, both before and after the revision. On this basis, we conclude that while the policy effects on the level of trade receivables are significant, those on the adjustment are not.

Suggested Citation

  • Tsuruta, Daisuke, 2025. "Does SME policy enhance the adjustment of trade credit? Evidence from a revision of the Subcontract Act in Japan," Japan and the World Economy, Elsevier, vol. 74(C).
    • Handle: RePEc:eee:japwor:v:74:y:2025:i:c:s0922142525000143
    DOI: 10.1016/j.japwor.2025.101310
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0922142525000143
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.japwor.2025.101310?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Keywords

    Small businesses; Trade credit; Small and medium enterprise policy; Partial adjuster model;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L53 - Industrial Organization - - Regulation and Industrial Policy - - - Enterprise Policy

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:japwor:v:74:y:2025:i:c:s0922142525000143. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/505557 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.