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Reverse trade credit - the use of prepayments by French firms

  • Simona Mateut

This paper provides the first detailed empirical study on the use of prepayments by firms. Our results based on large panels of French firms support the Daripa and Nilsen (2011) production subsidy theory of prepayment, according to which customers prepay their suppliers when these would otherwise delay production and input supply. However, we also find that advance cash payments may arise as a response to corporate default risk. Our findings show that both firm characteristics (profitability, liquidity, bank funding, and size) and industry characteristics such as the type of traded goods and industry concentration measures influence the volume of prepayments.

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File URL: http://www.nottingham.ac.uk/cfcm/documents/papers/11-12.pdf
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Paper provided by University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM) in its series Discussion Papers with number 11/12.

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Handle: RePEc:not:notcfc:11/12
Contact details of provider: Postal: School of Economics University of Nottingham University Park Nottingham NG7 2RD
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Web page: http://www.nottingham.ac.uk/cfcm/index.aspx

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  1. Daniela Fabbri & Anna Maria Cristina Menichini, 2005. "Trade Credit, Collateral Liquidation and Borrowing Constraints," CSEF Working Papers 146, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy, revised 08 Feb 2009.
  2. Mustafa Caglayan & Sara Maioli & Simona Mateut, 2011. "Inventories and sales uncertainty," Working Papers 2011003, The University of Sheffield, Department of Economics, revised Feb 2011.
  3. Mitchell A. Petersen & Raghuram G. Rajan, 1996. "Trade Credit: Theories and Evidence," NBER Working Papers 5602, National Bureau of Economic Research, Inc.
  4. Rauch, James E., 1999. "Networks versus markets in international trade," Journal of International Economics, Elsevier, vol. 48(1), pages 7-35, June.
  5. Martin Raiser & Alan Rousso & Franklin Steves, 2004. "Trust in Transition: Cross-country and Firm Evidence," Others 0401007, EconWPA.
  6. Burkart, Mike & Ellingsen, Tore & Giannetti, Mariassunta, 2004. "What You Sell is What You Lend? Explaining Trade Credit Contracts," CEPR Discussion Papers 4823, C.E.P.R. Discussion Papers.
  7. Richard Disney & Jonathan Haskel & Ylva Heden, 2003. "Entry, Exit and Establishment Survival in UK Manufacturing," Journal of Industrial Economics, Wiley Blackwell, vol. 51(1), pages 91-112, 03.
  8. Simona Mateut & Spiros Bougheas & Paul Mizen, . "Corporate trade credit and inventories: New evidence of a tradeoff from accounts payable and receivable," Discussion Papers 08/09, University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM).
  9. Mike Burkart & Tore Ellingsen, 2004. "In-Kind Finance: A Theory of Trade Credit," American Economic Review, American Economic Association, vol. 94(3), pages 569-590, June.
  10. Utku Teksoz, 2008. "Trust in Transition: Cross-Country and Firm Evidence," Journal of Law, Economics and Organization, Oxford University Press, vol. 24(2), pages 407-433, October.
  11. Simona Mateut & Paul Mizen & Ydriss Ziane, . "No Going Back: The Interactions Between Processed Inventories and Trade Credit," Discussion Papers 11/04, University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM).
  12. Arup Daripa & Jeffrey Nilsen, 2011. "Ensuring Sales: A Theory of Inter-firm Credit," American Economic Journal: Microeconomics, American Economic Association, vol. 3(1), pages 245-79, February.
  13. Tae-Hwy Lee & Faik Koray, 1994. "Uncertainty in Sales and Inventory Behaviour in the U.S. Trade Sectors," Canadian Journal of Economics, Canadian Economics Association, vol. 27(1), pages 129-42, February.
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