This paper studies the effect of financial crises on trade credit in a sample of 890 firms in six emerging economies. We find that although provision of trade credit increases right after the crisis, it consequently collapses in the following months and years. We observe that firms with weaker financial position (for example, high pre-crisis level of short-term debt and low cash stocks and cash flows) are more likely to reduce trade credit provided to their customers. This suggests that the decline in aggregate credit provision is driven by the reduction in the supply of trade credit, which follows the bank credit crunch. Our results are consistent with the "redistribution view" of trade credit provision, in which bank credit is redistributed via trade credit by the firms with stronger financial position to the firms with weaker financial stand.

There is currently a large interest in understanding firms' acess to finance, and the financing of smalland medium-sized enterprises (SMEs) in particular. However, the financing patterns of SMEs across countries is not well understood; for example, little is known about the relative importance of equity, debt, and inter-firm financing for SMEs across countries. This paper uses the AMADEUS database, which includes financial information on over 97,000 private and publicly traded firms in 15 Eastern and Central European countries. The Amadeus database allows us the opportunity to provide a new analysis of the general financing patterns of private firms across a large sample of Eastern European countries. Our summary statistics show that the size of the SME sector (as measured by the percentage of total employment) in Eastern European countries is smaller than what we observe in most developed economies. Although we find in almost every country in our sample a large number of SMEs as a percentage of total firms, the SMEs in Eastern Europe are generally small and hire few employees. However, SMEs seem to constitute the most dynamic sector of the Eastern European economies, relative to large firms. In general, the SME sector comprises relatively younger, more highly leveraged, and more profitable and faster growing firms. This suggests that a new type of firm is emerging in transition economies that is more market-and profit-oriented. But at the same time, these firms appear to have financial constraints that impede their access to long-term financing and ability to grow.

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The authors thank the Europe and Central Asia (ECA) region of the World Bank for their financial support. The authors also thank Marie-Renee Bakker and Michel Noel for valuable comments.

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