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Trade credit during a financial crisis: A panel data analysis

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  • Bastos, Rafael
  • Pindado, Julio

Abstract

This paper investigates the use of trade credit by firms from countries that have recently undergone a financial crisis. The paper examines a sample of 147 firms from Argentina, Brazil, and Turkey and finds empirical evidence that supports the substitution hypothesis between bank credit and trade credit. The paper also supports the matching hypothesis in which firms that delay collection from their customers then demand long-term trade credit from their suppliers. Specifically, the paper finds that firms that present high levels of days-of-sales outstanding and a high probability of insolvency use more trade credit and that these relations are enhanced during a financial crisis. Results suggest that credit constraints during a financial crisis cause firms holding high levels of accounts receivable to postpone payments to suppliers. Specifically, high-risk firms postpone suppliers' payments to avoid insolvency. These results can be interpreted as evidence of a credit contagion in the supply chain.

Suggested Citation

  • Bastos, Rafael & Pindado, Julio, 2013. "Trade credit during a financial crisis: A panel data analysis," Journal of Business Research, Elsevier, vol. 66(5), pages 614-620.
  • Handle: RePEc:eee:jbrese:v:66:y:2013:i:5:p:614-620
    DOI: 10.1016/j.jbusres.2012.03.015
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    References listed on IDEAS

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    Cited by:

    1. repec:eee:finsta:v:38:y:2018:i:c:p:53-70 is not listed on IDEAS
    2. Kemal Turkcan, 2016. "Evolving Patterns of Payment Methods in Turkish Foreign Trade," World Journal of Applied Economics, WERI-World Economic Research Institute, vol. 2(1), pages 3-29, June.
    3. Maria Siranova & Menbere Workie Tiruneh, 2016. "The determinants of errors and omissions in a small and open economy: The case of Slovakia," Working Papers wp73, Institute of Economic Research, SAS, revised 08 Apr 2016.
    4. Degryse, Hans & Matthews, Kent & Zhao, Tianshu, 2018. "SMEs and access to bank credit: Evidence on the regional propagation of the financial crisis in the UK," Journal of Financial Stability, Elsevier, vol. 38(C), pages 53-70.
    5. Nicoleta Barbuta-Misu & Fitim Deari, 2016. "Determinants of Trade Credit: A Preliminary Analysis on Construction Sector," Risk in Contemporary Economy, "Dunarea de Jos" University of Galati, Faculty of Economics and Business Administration, pages 306-314.
    6. Lars Norden & Stefan van Kampen, 2015. "The Dynamics of Trade Credit and Bank Debt in SME Finance: International Evidence," RBA Annual Conference Volume,in: Angus Moore & John Simon (ed.), Small Business Conditions and Finance Reserve Bank of Australia.

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