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Does trade credit play a signalling role? Some evidence from SMEs microdata

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  • Mariarosaria Agostino
  • Francesco Trivieri

Abstract

Using micro-data on small- and medium-sized enterprises, this paper empirically investigates the “signalling hypothesis” formulated on the role of trade credit (Biais and Gollier in Rev Financ Stud 10: 903–937, 1997 ; Burkart and Ellingsen in Am Econ Rev 94: 569–590, 2004 ). The research method adopted allows evaluation of the impact of suppliers’ credit on bank debt accounting for the strength (duration) of bank–firm relationships. Our main finding is that trade credit seems to have an information content for banks, especially when the latter do not dispose of adequate (soft) information on firms, which is likely the case at the beginning stages of bank–firm relationships. An implication of our results is that the availability of suppliers credit might be crucial to foster access to institutional funding for new firms entering the market. Our evidence also suggests that banks seem to consider suppliers a reliable source of information on firms’ financial conditions even after several years of lending relationships. Copyright Springer Science+Business Media New York 2014

Suggested Citation

  • Mariarosaria Agostino & Francesco Trivieri, 2014. "Does trade credit play a signalling role? Some evidence from SMEs microdata," Small Business Economics, Springer, vol. 42(1), pages 131-151, January.
  • Handle: RePEc:kap:sbusec:v:42:y:2014:i:1:p:131-151
    DOI: 10.1007/s11187-013-9478-8
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    11. Afrifa, Godfred Adjapong & Gyapong, Ernest & Monem, Reza M., 2018. "Product differentiation, market dynamics and the value relevance of trade payables: Evidence from UK listed firms," Journal of Contemporary Accounting and Economics, Elsevier, vol. 14(3), pages 235-253.
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    More about this item

    Keywords

    Trade credit; Signalling; Bank financing; Lending relationships; Small and medium enterprises; G21; G32; C33; L26;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

    Statistics

    Access and download statistics

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