Trade Credit in Small and Medium Size Firms: An Application of the System Estimator With Panel Data

Abstract

Financing through suppliers is a subject that has been little studied in the economic literature in general and in corporate finance in particular. Although several hypotheses have been put forward to explain the different reasons behind this phenomenon, trade credit is not based on a general theory. This study provides empirical evidence about factors determining the use of trade credit for a sample of small and medium size firms, which are potentially the firms that would follow this financing route, since they are more rationed in credit markets. Using a panel of Canary-Island firms from 1990 to 1996, and by means of specifications with the system estimator, results reveal that trade credit leads to a reduction in asymmetric information between firms and their financial backers, as well as in transaction costs. Furthermore, we confirm the theory that companies with easier access to institutional finance act as a credit channel for those with greater difficulties to obtain external funds. Copyright Springer 2006asymmetric information, panel data, system estimator, trade credit, transaction costs, D920, G30, M130,

Trade Credit, Bank Credit, and Flight to Quality: Evidence from French SMEs

“…It is only for SEs in the wood and paper industry and MEs in the food industry that we found support for the H2 hypothesis that trade credit acts as a substitute to bank credit after the onset of the financial crisis. This finding is in line with other empirical studies in trade credit indicating that when bank credit is scarce, trade credit is often used as a substitute (e.g., Couppey-Soubeyran and Héricourt 2011; Fisman and Love 2003;Nilsen 2002;Petersen and Rajan 1997;Rodriguez-Rodriguez 2006;Wilner 2000). An interesting finding here is that according to our estimates (see Table 3), trade credit appears to be a complement for bank credit for SEs in the wood and paper products industry during the period prior to the crisis.…”

A Dynamic Approach to Accounts Receivable: a Study of Spanish SMEs

“…Thus, trade credit is especially important for SMEs because of their greater difficulty in accessing capital markets (Petersen and Rajan, 1997; Berger and Udell, 1998). Most previous studies that analyse the determinants of trade credit have centred on large firms (Long et al ., 1993; Deloof and Jegers, 1996, 1999; Hernández and Hernando 1999; Cheng and Pike, 2003; Pike et al ., 2005, among others), while empirical evidence for SMEs is scarce and focused on Anglo‐Saxon countries (Petersen and Rajan, 1997, and Elliehausen and Wolken, 1993, for the USA; Wilson and Summers, 2002 for the UK) or focuses on accounts payable (Huyghebaert, 2005; Rodriguez‐Rodríguez, 2006; and Huyghebaert et al ., 2007): the only exception to this pattern is the study of Niskanen and Niskanen (2006), who studied small Finnish firms, focusing on a bank‐based system.…”

Le financement des PME en Tunisie

“…La variable « ressources internes disponibles » est approximée par le cash-flow ou le cash-flow net (CASHFLOW) correspondant à la somme du résultat net et des dotations aux amortissements et aux provisions (Laffont et Garcia, 1977 ;Sealey, 1979) ; -Une fonction décroissante du coût de son financement, en particulier pour le crédit d'investissement à long terme (Laffont et Garcia, 1977 ;Sealey, 1979). La variable « coût de financement » est approximée par le coût du financement (COUTFIN) défini par le ratio : charges financières/total de la dette bancaire (Bouabidi et Rajhi, 2008) ; -Une fonction décroissante de l'usage du crédit fournisseur (Elliehausen et Wolken, 1993 ;Rodríguez-Rodríguez, 2006). Le rationnement du crédit lié à l'asymétrie d'information ex ante pourrait conduire à un usage plus important du crédit fournisseur.…”