IDEAS home Printed from https://ideas.repec.org/a/kap/sbusec/v27y2006i2p103-126.html
   My bibliography  Save this article

Trade Credit in Small and Medium Size Firms: An Application of the System Estimator With Panel Data

Author

Listed:
  • Olga Rodríguez-Rodríguez

    ()

Abstract

Financing through suppliers is a subject that has been little studied in the economic literature in general and in corporate finance in particular. Although several hypotheses have been put forward to explain the different reasons behind this phenomenon, trade credit is not based on a general theory. This study provides empirical evidence about factors determining the use of trade credit for a sample of small and medium size firms, which are potentially the firms that would follow this financing route, since they are more rationed in credit markets. Using a panel of Canary-Island firms from 1990 to 1996, and by means of specifications with the system estimator, results reveal that trade credit leads to a reduction in asymmetric information between firms and their financial backers, as well as in transaction costs. Furthermore, we confirm the theory that companies with easier access to institutional finance act as a credit channel for those with greater difficulties to obtain external funds. Copyright Springer 2006

Suggested Citation

  • Olga Rodríguez-Rodríguez, 2006. "Trade Credit in Small and Medium Size Firms: An Application of the System Estimator With Panel Data," Small Business Economics, Springer, vol. 27(2), pages 103-126, October.
  • Handle: RePEc:kap:sbusec:v:27:y:2006:i:2:p:103-126
    DOI: 10.1007/s11187-006-0017-8
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s11187-006-0017-8
    Download Restriction: Access to full text is restricted to subscribers.

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

    References listed on IDEAS

    as
    1. Giuseppe Marotta, 2001. "Is trade credit more expensive than bank loans? Evidence from Italian firm-level data," Heterogeneity and monetary policy 0103, Universita di Modena e Reggio Emilia, Dipartimento di Economia Politica.
    2. 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.).
    3. Schwartz, Robert A., 1974. "An Economic Model of Trade Credit," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 9(04), pages 643-657, September.
    4. Raymond Fisman & Inessa Love, 2003. "Trade Credit, Financial Intermediary Development, and Industry Growth," Journal of Finance, American Finance Association, vol. 58(1), pages 353-374, February.
    5. Arellano, Manuel & Honore, Bo, 2001. "Panel data models: some recent developments," Handbook of Econometrics,in: J.J. Heckman & E.E. Leamer (ed.), Handbook of Econometrics, edition 1, volume 5, chapter 53, pages 3229-3296 Elsevier.
    6. Denisova Irina, 2000. "Credit Channel of Monetary Transmission: the Role of Industrial Interenterprise Arrears," EERC Working Paper Series 99-12e, EERC Research Network, Russia and CIS.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. repec:eee:corfin:v:46:y:2017:i:c:p:391-410 is not listed on IDEAS
    2. 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).

    More about this item

    Keywords

    asymmetric information; panel data; system estimator; trade credit; transaction costs; D920; G30; M130;

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

    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:kap:sbusec:v:27:y:2006:i:2:p:103-126. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla) or (Rebekah McClure). General contact details of provider: http://www.springer.com .

    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.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.