Firm size effects in trade credit supply and demand

Lawrenz, Jochen; Oberndorfer, Julia

doi:10.1016/j.jbankfin.2018.05.014

Cited by 37 publications

(16 citation statements)

References 48 publications

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“…The extant empirical literature offers some hints suggesting that trade credit redistribution skewed by imbalance of bargaining power may ultimately be a negative-sum game. In particular, Lawrenz and Oberndorfer (2018) show that in the event of credit contraction, financially constrained companies with no substitute sources of external financing face larger cuts to trade credit provision than unconstrained companies. Since the former are more reliant on trade credit, reallocation of financial resources imperils their survival to the detriment of the economy as a whole.…”

Section: Hypotheses Developmentmentioning

confidence: 97%

Predatory trade finance: the impact of bargaining power and financing constraints on the demand and supply of trade credit

Osiichuk

Mielcarz

2021

Journal of Applied Economics

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We demonstrate that the "predator-prey" metaphor may be wellsuited to describe trade finance mechanisms in emerging economies. Having analyzed the dynamics of trade credit in the Polish corporate sector over the period between 1997 and 2014, we found that suppliers of trade credit were smaller, younger, less liquid, less indebted, and more financially constrained than the beneficiaries thereof. The firms, which increased trade receivables during the analyzed period, improved their asset turnover ratio at the expense of operating profitability. In a quest for growth and cash flows, these firms appear to be forced to supply trade credit to their counterparties with a stronger bargaining position. Companies, which reported higher trade payables, enjoy higher cash flows and a better access to external financing, yet with no improvements to the operating KPIs. In contrast to the conventional wisdom, we hypothesize that trade credit bargaining may be a negative-sum game.

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Section: Hypotheses Developmentmentioning

confidence: 97%

Predatory trade finance: the impact of bargaining power and financing constraints on the demand and supply of trade credit

Osiichuk

Mielcarz

2021

Journal of Applied Economics

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“…Generally, the rate should be lower in an economic recession and higher in an economic boom. This is important for borrowers (SMEs), which tend to be discouraged from demanding bank loans, especially as they are more susceptible to recessive macroeconomic effects via the financial sector (Lawrenz and Oberndorfer 2018).…”

Section: Literature Reviewmentioning

confidence: 99%

“…The global financial crisis (GFC) of 2008-09 and the way in which it affected the supply of external credit and the logistic framework and effectiveness of CGSs in supporting SMEs sparked rigorous study. Lawrenz and Oberndorfer (2018) and Wang et al (2019) agreed that the decline in the credit supply from the GFC particularly adversely affected SMEs and that they struggled to compensate by using alternative financial channels, such as trade credit. Consistent with Daskalakis, Balios, and Dalla (2017), the financial system needs broadening in a way that supports SMEs in lowering their transaction costs and improves the adaptive capacity in the capital structure, as long-term debt ratios (i.e.…”

Section: Introductionmentioning

confidence: 99%

A model for calculating optimal credit guarantee fee for small and medium-sized enterprises

et al. 2021

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Small and medium-sized enterprises (SMEs) have difficulties in accessing finance because of information asymmetry and a lack of collateral. A credit guarantee scheme is a suitable method to unlock lending to SMEs; however, it involves SMEs paying a fee, which needs to account for their risk. The question is how to calculate the optimal fee. The paper provides a theoretical model for calculating the optimal credit guarantee fee. In the empirical part, this study investigates whether selected macroeconomic variables and the financial health of SMEs have a statistically significant impact on the default risk ratio of SMEs, which is the main determinant of the fee. We use selected macroeconomic variables and the financial profiles of 1,363 SMEs that are customers of an Iranian bank. We use principle component analysis and two vector error correction models, and we provide a robustness test using the generalized method of moments. The empirical results support our hypothesis that the credit guarantee fee should be different for sound (lower) and unsound (higher) SMEs to avoid moral hazard but also according to the macroeconomic state (a decrease in a recession and an increase in a boom).

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“…First, access to credit is particularly important for nascent and growing firms (Bassetto et al, 2015), therefore, the application of expansive monetary policies focused on facilitating access to financing are key to facilitate and encourage entrepreneurship. It must be considered that, when monetary policy is restrictive, the banking sector's response affects companies disproportionately depending on their size (Gaiotti & Generale, 2001;Bougheas et al, 2006;Lawrenz & Oberndorfer, 2018) due to their access to alternative sources of financing to bank credit (Ma et al, 2019). Specifically, it causes banks to change their credit offer in favor of large companies to the detriment of small ones (Gertler & Gilchrist, 1994;Back & Rosen, 2011).…”

Section: Economic and Socio-cultural Factors Affecting Necessity And mentioning

confidence: 99%

Economic and Socio-Cultural Drivers of Necessity and Opportunity Entrepreneurship Depending on the Business Cycle Phase

Martínez-Rodríguez

Callejas-Albiñana

2020

Journal of Business Economics and Management

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This paper offers an in-depth examination of the behavior of necessity- and opportunity driven entrepreneurship. First, it considers their relevance to total entrepreneurial activity. It then seeks to determine which socio-cultural and economic factors affect the two types of entrepreneurship, as well as their relative importance for a sample of 32 previously selected countries during a period of expansion (2001–2008) and of crisis and recovery (2009–2016). The analyzed factors include monetary and fiscal policy instruments (economic factors) and representative variables of governance and human capital (socio-cultural ones). The findings show that both necessity- and opportunity-driven entrepreneurship largely explain the behavior of total entrepreneurial activity. They moreover show that the explanatory factors of both kinds of entrepreneurship differ depending on the business cycle phase considered. These findings will be key to proposing efficient economic policy measures to promote entrepreneurial activity and, thus, economic growth in different economies around the world.

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Firm size effects in trade credit supply and demand

Cited by 37 publications

References 48 publications

Predatory trade finance: the impact of bargaining power and financing constraints on the demand and supply of trade credit

Predatory trade finance: the impact of bargaining power and financing constraints on the demand and supply of trade credit

A model for calculating optimal credit guarantee fee for small and medium-sized enterprises

Economic and Socio-Cultural Drivers of Necessity and Opportunity Entrepreneurship Depending on the Business Cycle Phase

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