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When do trade credit discounts matter? Evidence from Italian firm-level data

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  • Giuseppe Marotta

Abstract

Italian firms are top users of trade credit in an international comparison. The paper offers some clues to the determinants of this stylized fact exploiting the answers of about 1900 manufacturing firms on a wide range of contractual features, separately for domestic and foreign customers. The main finding of the univariate analysis is that, with the almost totality of transactions made on credit, there is no evidence that this way of financing is more expensive than loans. An econometric investigation shows that discounts offered have the expected effect of reducing payment delays mostly for customers located abroad, where customary credit periods are shorter and creditors' rights protection is more effective. The result is consistent with the poor explanatory power of discounts received in regressions for the trade debt period of domestic firms.

Suggested Citation

  • Giuseppe Marotta, 2005. "When do trade credit discounts matter? Evidence from Italian firm-level data," Applied Economics, Taylor & Francis Journals, vol. 37(4), pages 403-416.
  • Handle: RePEc:taf:applec:v:37:y:2005:i:4:p:403-416
    DOI: 10.1080/0003684042000329063
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    References listed on IDEAS

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    Cited by:

    1. Martin Boyer, M. & Gobert, Karine, 2009. "The impact of switching costs on vendor financing," Finance Research Letters, Elsevier, vol. 6(4), pages 236-241, December.
    2. 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.
    3. 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.
    4. Alarcón, Silverio, 2008. "The Role of Trade Credit in the Spanish Agrogood Industry," 2008 International Congress, August 26-29, 2008, Ghent, Belgium 43861, European Association of Agricultural Economists.
    5. Tsuruta, Daisuke, 2015. "Bank loan availability and trade credit for small businesses during the financial crisis," The Quarterly Review of Economics and Finance, Elsevier, vol. 55(C), pages 40-52.
    6. 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

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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