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Our work focuses on the impact of trade credit financing on firm efficiency exploiting a sample of Chinese manufacturing listed firms for the period 2004 to 2018. We find that trade credit significantly improves firm efficiency. This positive association is stronger in firms located in regions with higher levels of social trust, during periods with higher economic policy uncertainty and in times of economic downturn. We reveal three economic mechanisms underlying our baseline findings: alleviating financial constraints, mitigating agency conflicts, and reducing transaction costs. This work was supported by the National Natural Science Foundation of China (Grant No. 71703127, No. 71872022 and No. 72272018), the Fundamental Research Funds for the Central Universities (Grant No. 2022CDSKXYJG007) and the China Postdoctoral Science Foundation (Grant No. 2022M710511).

We document the propagation through supply chains of the most damaging cyberattack in history and the important role of banks in mitigating its impact. Customers of directly hit firms saw reductions in revenues, profitability, and trade credit relative to similar firms. The losses were larger for customers with fewer alternative suppliers and suppliers producing high-specificity inputs. Internal liquidity buffers and increased borrowing, mainly through bank credit lines, helped affected customers maintain investment and employment. However, the shock led to persisting adjustments to the supply chain network.

As a critical aspect of corporate financing strategies, high-quality trade credit has been acknowledged as a favorable indicator for external stakeholders. Given the increasing prominence of sustainable development, it is worthwhile to explore whether an advanced environmental management system facilitates the attainment of financing for business operations. Therefore, to respond to this question, this study utilizes panel data spanning from 2012 to 2021, comprising Chinese listed firms in four energy and environment-related sectors, with the environmental dimension score of the CSI ESG scoring system employed for categorizing the sample into high and low environmental governance groups. The results reconcile the conflicting studies and find an inverted U-shaped effect between trade credit and corporate bank loans with lower levels of environmental governance. Within the domain characterized by higher environmental governance, the two are substituted for each other. In addition, this study introduces the Shapely decomposition method for the first time to quantify the contribution of trade credit to corporate bank loans. Drawing from these findings, we proposed practical advice to firms, financial institutions, and the government on how to choose between bank loans and trade credit against the background of sustainable development.

Game-theoretic trade credit models are quite scarce, especially in relation to product promotion. This work examined a trade credit supply chain involving a manufacturer and two retailers in a decentralised supply chain in which the retailers engage in product promotion while the manufacturer financed them through credit provision. It considered a supply chain structure in which the manufacturer provides trade credit to the retailers and a situation in which he does not provide trade credit. It used Stackelberg game theory to determine the optimal promotion efforts, the credit periods and the players’ payoffs, and showed that while the manufacturer is better-off with the retailers’ efforts, the retailers need to consciously determine appropriate optimal effort to avoid getting short-changed. It also showed that while credit period reduces with the manufacturer’s margin, it increases with a retailer’s margin. It further showed that while the retailers’ payoffs reduce continuously with credit period, the manufacturer’s payoff is fixed in the long-run irrespective of the credit period provided by the manufacturer to the retailers. By comparison the players as well as the channel perform better with the adoption of trade credit, however a retailer must avoid placing he price margin at equality with that of the manufacturer if he hopes to enjoy long credit period.

Global climate change presents a growing danger to the environment, economies, and human population as well as disrupting sophisticated ecological systems. Several nations have enacted rules and measures to reduce and regulate firms' carbon emissions in response to these concerns. With the growing attention being paid to carbon emissions, corporations are increasingly concerned about their exposure to carbon risk. Indeed, investors are aware of carbon risk and require higher compensation to bear this risk (e.g., Bolton and Kacperczyk, 2021). This research paper aims to analyze the influence that carbon risk has on a companies' trade credit using a sample of selected companies in the US from 2001-2019. We argue that companies with high carbon risk are not well reputed, hence are less likely to obtain informal finance. Therefore, we anticipate a negative relationship between a company's carbon risk and trade credit. The findings we obtained are robust to a set of robustness tests and to addressing endogeneity issues. The results provide propositions for corporations and policymakers since it highlights the importance of reducing carbon risk for the the access to informal financing.

Guarantee credit financing (GCF), allows banks to offer loans to capital-constrained retailer (he) based on the guarantee contracts offered by the manufacturer (she). Therefore, this study investigates the signaling role of guarantee contracts when the retailer is less informed about its product's market potential. In particular, we explore a joint contract of guarantee credit and production quantity to deliver the manufacturer's demand information. We add a framework to the capital-constrained supply chain with asymmetric demand information under GCF. Using a signaling game to capture the demand information asymmetry, we identify the strategic interaction between the retailer and the manufacturer under GCF. Also, we investigate the value of GCF when both GCF and trade credit financing (TCF) are viable. We find that the single guarantee contracts cannot signal the manufacturer's demand information when the production cost is less than a threshold, otherwise, only the separating equilibria survive the intuitive criterion. Besides, the findings reveal that the demand information asymmetry can either benefit or harm the retailer or the manufacturer, but cannot benefit both of them. In addition, GCF remains an attractive financing option when both GCF and TCF are viable. A joint contract of guarantee credit and production quantity can be used to deliver the demand information if the guarantee contracts are invalid. Our paper helps to explain the impact of asymmetric demand information on supply chain partners’ decisions under GCF and sheds light on the design and use of guarantee contracts.

Whether the intellectual property protection (IPP) system can improve the financing environment for enterprise innovation is a poorly studied research issue. Taking the Chinese ‘three-in-one trial’ reform of intellectual property rights (IPRs) as a quasi-natural experiment; we investigate the impact of strengthening IPP on trade credit financing of high-tech enterprises. The results show that strengthening IPP can promote their trade credit by about 2%, and the technology market effect, innovation effect and information effect are the underlying mechanisms. Further tests indicate that the promotion effects of IPP are more obvious on hightech enterprises with lower government support, lower proportion of fixed assets and healthier government–business relationship. Different from the previous literature, which focuses on the relationship between IPP and innovation activities or benefits, this article expands the literature by investigating its impact on innovation financing and fills the research gap of the impact of IPP on capital market information searching.

We study a seller's trade credit provision decision in a situation of repeated contracting with incomplete information over the buyer's payment propensity when the enforceability of formal contracts is uncertain. The payment terms of a transaction are selected in an inter-temporal trade-off between improving the quality of information acquisition and mitigating relationship breakdown risks. When contract enforcement institutions are weak, the optimal within-relationship provision dynamics of trade credit can be uniquely determined and depend on the share of patient buyers in the destination market as well as their access to liquidity. We obtain empirical evidence showing that in developing countries the relevance of trade credit in buyers' payment schedules has risen over-proportionally in recent years.

Fundamentally, newborn items that are used commercially, such as chicken, fish, and small camel, grow day by day in size and also increase their weight. The seller offers a credit policy to the buyer to increase sales for a particular growing item (fish), and in this paper, it is assumed that the buyer accepts the policy of the trade credit. In this paper, the buyer acquires the newborn items (fish) from the seller and then sells them when the newborn items have increased their size and weight. From this point of view, the present paper reveals a fuzzy-based supply chain model that includes carbon emissions and a permissible delay in payment for defective growing items (fish) under the effect of learning where the demand rate is imprecise in nature and is treated as a triangular fuzzy number. Finally, the buyer’s total profit is optimized with respect to the number of newborn items. A numerical example has been presented for the justification of the model. The findings clearly suggest that the presence of trade credit, learning, and a fuzzy environment have an affirmative effect on the ordering policy. The buyer should order more to avoid higher interest charges after the grace period, which eventually increases their profit, while at the same time, it is also beneficial for the buyer to order less to gain the benefit of the trade credit period. The fuzziness theory controls the uncertainty situation of inventory parameters with the help of a de-fuzzified method. The lower and upper deviation of demand affects the total fuzzy profit. The effect of learning gives a positive response concerning the size of the order and the buyer’s total fuzzy profit. This means that the decision-maker should be aware of the size of the newborn items, rate of learning, and trade credit period during the supply chain because these directly affect the buyer’s total fuzzy profit. The impact of the inventory parameter of this model is presented with the help of sensitivity analysis.

It is a known fact that a number of market factors determine the provision of trade credit to a financially constrained channel member. It is only recently that credit function was developed to incorporate some of these factors. This paper considers a modification of the credit function in which the retailer-manufacturer credit period ratio determines the amount of credit the manufacturer can give to the retailer. This study considers a Stackelberg game in which the manufacturer who is the channel leader provides trade credit to the retailer through his credit period while the retailer engages in product promotion to sell the product. The work uses backward induction to determine a closed-form solution of the promotion effort, the credit period and the payoffs. The result shows that the promotion effort increases with the manufacturer’s credit period, but reduces with that of the retailer. It also shows that while both players payoffs increase with the manufacturer’s credit period, the manufacturer’s performance is better-off. On the other hand, while the retailer’s payoff reduces with his credit period, the manufacturer’s payoff increases continuously. Thus, it is rational for the retailer to opt for the optimal credit period instead of over elongating the credit period.

BACKGROUND: Within the conceptual paradigm that the business environment of South Africa could significantly impact on small and medium-sized enterprises, (SMEs) management of trade credit, the need exists for internal and external business environmental factors to be constructed, in order to understand how SMEs rate these factors. AIM: The research purpose was to identify and construct relevant internal and external business environmental factors and obtain SME ratings for these factors to statistically test the validity and reliability of the measurement instrument. SETTING: This study was conducted by administering an online questionnaire. METHOD: Quantitative research design with purposive sampling as the sampling method, administrated to 10 450 SMEs within South Africa. RESULTS: A descriptive statistical analysis revealed that the highest quality internal and external business environmental components were managerial competencies and ethics, respectively. Factor analysis resulted in the formulation of five internal and six external business environmental factors. In addition, SMEs do not rate internal and external business environmental factors equally. Managerial competencies obtained the highest overall mean score for all business environmental factors, including the highest for internal factors. Small and medium-sized enterprise and debtor ethical performance obtained the highest means score for external factors. CONCLUSION: The formulation of newly constructed internal and external business environmental factors relevant to SMEs' management of trade credit. CONTRIBUTION: As far as can be established, research identifying variables and constructing internal and external business environmental factors relevant to SME management of trade credit has not been conducted in South Africa. The newly formulated internal and external business environmental factors broaden SMEs' understanding of which business environmental factors are relevant to SMEs' management of trade credit, including how SMEs rate these factors.

This paper examines the impact of trust on informal financial development. We isolate the inherited component of trust for 19 countries using US census data and relate it to firms’ access to trade credit. We discover that trust disproportionately elevates the use of trade credit by companies that face obstacles to obtaining funds from formal channels. Further analyses show that the effect is more pronounced in finance-dependent industries and that better access to trade credit promotes sales growth. Our results are robust to alternative samples, different estimations of inherited trust and various model specifications.

This paper investigates the impact of business strategy on firms’ trade credit policies. We find that firms following an innovation-oriented strategy (prospectors) offer significantly more trade credit to their customers than those following an efficiency-oriented strategy (defenders). Furthermore, by exploiting two exogenous shocks to the supplies of high-skill employees and bank credit, we find that prospectors curtail trade credit in response to the reduction of talent mobility following the adoption of Inevitable Disclosure Doctrine, whereas defenders significantly increase provisions of trade credit following the increase in bank credit supply due to the relaxation in interstate branching regulations. Additional evidence substantiates that prospectors increasing trade credit provisions enjoy higher sales generation efficiency and superior performance. Finally, our supply chain analysis documents that prospectors also receive significantly more trade credit from their suppliers. Collectively, our findings highlight that business strategy is an important yet intrinsic determinant of supply chain financing.

This work analyzes the relation between the judicial system and financial constraints, investigating whether inefficiency in enforcing credit rights can amplify companies' difficulties in collecting resources on the capital market, limiting their access to the funds needed to support investments and environmental sustainability. Considering the Italian manufacturing industry and according to the selected insolvency procedures, our results suggest that, if the time necessary to settle cases decreases by 20%, we can expect an increase in the financial debt ratio between 0.92% and 5.08% and a decrease in the trade credit ratio between 0.81% and 2.71%, as well as an increase in investments between 0.46% and 3.22%. These results are robust under a variety of tests and support the hypothesis that judicial inefficiency represents a barrier to environmental sustainability, preventing investments in key technologies able to support green strategies, as well as the key role of trade dynamics as alternative funding strategy for their business. The economic implications of our evidence could be far-reaching for the whole economy, not only reducing the competitiveness and financial stability of the national system but also triggering a cascade effect on the market and undermining environmental strategies.

Due to poor ability to resist risks, penniless retailers face high bankruptcy risk, which may spread to suppliers who provide trade credit for them and then affect suppliers’ trade credit provision decision. A supplier who transacts with downstream retailers with heterogeneous credit ratings has three trade credit provision strategies: null (the supplier does not provide trade credit), exclusive (the supplier provides trade credit for only a part of retailers), and nonchalant trade credit provision (the supplier provides trade credit for all retailers). In this study, we establish a two-echelon supply chain model comprising one supplier and two capital-constrained retailers to investigate the supplier’s and retailers’ preferences for different trade credit provision patterns. By analyzing and comparing the three trade credit provision strategies, we find that the supplier is always beneficial from providing nonchalant trade credit. However, nonchalant trade credit provision is only attractive for the excluded retailer when his creditworthiness is poor and for the privileged retailer, nonchalant trade credit provision is never a preferable option, which leads to a counterintuitive situation that the three parties can never reach an agreement on trade credit provision pattern. Our results indicate that credit rating information serves as a risk warner for the supplier, allowing the supplier to evaluate the retailers’ repayment ability accurately and set interest rates accordingly, but this is unfavorable to the retailers. For policy-makers, they should start with reducing the risk of default in trade credit to promote the development of trade credit.

With the development of e-commerce, manufacturers now have the opportunity to compete with existing retail channels by introducing their direct channels. Encroachment weakens the strength of retail channels, which may affect the manufacturer's decision on whether to provide trade credit financing to retailers. This study investigates the strategic interaction between manufacturer's encroachment and retailers’ financing choices (trade credit financing or external financing) in a supply chain consisting of a manufacturer and two capital-constrained retailers. We find that only encroachment cost below a certain threshold will make the manufacturer encroach on the market, while manufacturer encroachment is harmful to capital-constrained retailers. Surprisingly, these retailers can expand the ratios of equity financing in anticipation of manufacturer encroachment, which is a new strategic role of equity financing. In addition, the more intense the channel competition (the larger the credit gap between the two retailers) is, the less (more) likely the manufacturer will be to encroach. Further, we find that retailers prefer trade credit (external) financing at a low (high) bank loan interest rate in a non-encroachment scenario, while they prefer external financing in an encroachment scenario. However, the manufacturer always prefers the case that both retailers choosing external financing. Finally, there are financing choice conflicts between the manufacturer and retailers in the non-encroachment scenario. A high-credit retailer choosing trade credit financing may make all members achieve a Pareto improvement when the credit gap between two retailers is large; otherwise, both retailers choosing external financing is a Pareto improvement.

We construct a sample of over 200,000 supply chains between 2003 and 2018 to conduct a chain-based analysis of trade credit. Our study uncovers novel stylized facts about trade credit both within and across supply chains. More upstream firms borrow more from suppliers, lend more to customers, and hold more net trade credit. This upstreamness effect in trade credit is weaker for more profitable firms and for longer chains. Firms in more central or more profitable chains provide more net trade credit. Our results are generally consistent with the recursive moral hazard theory of trade credit. Evidence for the financing advantage theory is mixed.

The deterioration rate is a significant aspect of perishable goods. Since perishable items will always deteriorate, there are effective methods for reducing the rate of deterioration. Furthermore, in the existing inventory control literature, the deterioration rate is often viewed as an exogenous component. Keeping this problem in mind, this article develops the perishable inventory control system from the retailer’s perspective in which: (i) the deterioration rate is a controllable factor and suggests a new fresh quality technology (FQT) indicator, (ii) demand is determined by the perishable product’s quality, that is controlled by its rate of deterioration, (iii) the credit duration is predefined, and (iv) shortages are expected. The key goal is to demonstrate that there is an ideal quantity of the order that minimizes the retailer’s overall cost in terms of cycle time and deterioration rate. Finally, theoretical results are validated by solving two numerical illustrations and conducting a sensitivity analysis of the main factors resulting from the following managerial implications: (i) if the range of deterioration is between zero and one then the retailer should invest in the preservation factor to preserve the perishable product and if greater than one the retailer should not invest in the preservation factor, (ii) credit period significantly reduces the total cost. Hence, this trade credit strategy is more beneficial to the model.

In this paper we integrate the costs of trade finance in a computable general equilibrium (CGE) model to evaluate the trade and output effects of counterfactual policy experiments on costs of and access to trade finance. The costs of financing international trade consist of two components: the financial costs and the costs associated with the risk of goods not being delivered, considering risk aversion of traders. These costs are determined for four ways to finance international trade (cash-in-advance, trade loans, letters of credit, and exports financed with internal working capital). Trade finance costs are a weighted average of the costs under the four different ways of financing. The framework is applied to trade of four ECOWAS countries employing data collected on financial costs, costs of risk and trade finance instrument shares through a comprehensive bank survey in these countries complemented with data from the literature. Counterfactual experiments on increases in the availability of letters of credit and trade loans and the costs of these instruments show that raising the shares and costs to African averages would increase trade of the four ECOWAS countries by about 11%. The framework is generic and can be applied to other countries.

Страхование торговых кредитов критически важно для бесперебойной работы национального хозяйства любой современной страны, а также ведения ею эффективной внешнеторговой деятельности. Вплоть до начала 2022 г. основная часть страхового покрытия российских торговых кредитов обеспечивалась дочерними структурами международных кредитных страховщиков. Государственные финансовые институты – ЭКСАР и Российская национальная перестраховочная компания (РНПК) – смогли в кратчайшие сроки заместить ушедшие западные компании, обеспечив не только текущую деятельность, но и дальнейшее развитие российской внешней торговли., Trade credit insurance is critically important for any modern national economy to operate smoothly, as well as to conduct effi ciently foreign trade activities. Up until early 2022, subsidiaries of international credit insurers provided the bulk of insurance coverage for Russian trade loans. The Russian state-owned financial institutions – Russian Agency for Export Credit and Investment (EXIAR) and Russian National Reinsurance Company (RNRC) – managed to replace shortly the departed Western companies, not only by supporting current business, but also by promoting further development of Russia’s foreign trade.

Resumo Objetivo Este estudo explora as condições de crédito comercial por meio de seu potencial para reduzir a assimetria da informação entre compradores e vendedores em um contexto de mercado emergente. Referencial teórico A linha teórica testada empiricamente neste artigo concentra-se na assimetria da informação entre empresas vendedoras e seus clientes compradores. Metodologia Com base em pesquisa (survey) com os CFOs de mais de 300 PMEs que atuam no Brasil, usamos regressões lineares e logit para testar nossas hipóteses. Resultados Os resultados apontam para evidências de uma variação considerável nas políticas e práticas, e para o fato de que parte da variação pode ser explicada em função das características da empresa. Identifica-se, ainda, sustentação para uma série de hipóteses baseadas em argumentos sobre formas de resolver a assimetria da informação entre compradores e vendedores, bem como a discriminação de preços. Implicações práticas e sociais da pesquisa Os empreendedores podem se beneficiar dos resultados deste estudo para gerenciar a assimetria da informação, além de estabelecer adequadamente os prazos de crédito. Contribuições O período de crédito permite que os compradores reduzam as incertezas quanto à qualidade do produto antes de efetuarem o pagamento e que os vendedores resolvam quaisquer incertezas que possam ter sobre as intenções de pagamento do comprador. Esse fenômeno, no entanto, é sensível a questões do ambiente institucional e, segundo evidências empíricas, pouco se sabe sobre as pequenas e médias empresas (PMEs) que atuam em mercados emergentes, que se caracterizam por sua incerteza e assimetria da informação. Abstract Purpose This study explores trade credit conditions by way of their potential for reducing information asymmetry between buyers and sellers in an emerging market context. Theoretical framework The theoretical line tested empirically in this article focuses on the information asymmetry between selling companies and their buying customers. Design/methodology/approach Based on a survey among the CFOs of more than 300 SMEs that operate in Brazil we use linear and logit regressions to test our hypotheses. Findings The results point to evidence of a considerable variation in policies and practices, and to the fact that part of the variation can be explained in terms of the characteristics of the firm. Support is also identified for a series of hypotheses based on arguments about ways of resolving information asymmetry between buyers and sellers, as well as price discrimination. Practical & social implications of research Entrepreneurs can benefit from the results of this study to manage information asymmetry, as well as to properly establish credit terms. Originality/value The credit period allows buyers to reduce uncertainties as to the quality of the product before they pay, and sellers can settle any uncertainties they might have about the buyer’s payment intentions. This phenomenon, however, is sensitive to institutional environment issues, and according to the empirical evidence little is known about small and medium-sized enterprises (SMEs) operating in emerging markets, which are characterized by their information uncertainty and asymmetry.

A consignment stock (CS) policy is a promising supply chain coordination mechanism. Delay-in-payments is a financing arrangement that facilitates purchases and increases sales by postposing a payment to some future time. It lowers costs and increases profitability, somewhat like what CS does. A study in the literature shows that combing the two reaps more benefits by considering different lot sizing and payment scenarios. Buy now, pay later, technically delay-in-payments, is a business practice for increasing sales. This paper revisits that work by assuming demand increases with the length of the delay period. This increases sales and, subsequently, profits beyond what that study reports.

We examine the effect of political connections (PCs) on firms' product market competition and the corresponding channels of this effect in China. Our findings suggest that PCs exert a negative impact on a firm's product market competition. Specifically, compared to non-PC firms, PC firms enjoy more competitive advantages. Moreover, we distinguish PCs stemming from managers and those stemming from directors. When compared to manager-only PC firms, director-only PC firms have stronger adverse effects on product market competition, indicating the effect of PCs is heterogeneous. Additional analysis shows that the effect of director-only PC firms on product market competition is more salient when directors have same industry and related-industry experience. Finally, we find corporate operating risks, trade credit, and financial constraints are important channels through which PCs influence product market competition.

International audience; This paper investigates the impacts of preferential credit policy, faced by capital constraint retailers, on coordinating the supply chain. Apart from different bank’s and manufacturer’s risk preferences, preferential credit is also affected by the retailers’ exogenous collateral. We establish the preferential credit coordinating model (PCCM) to examine the optimal decisions and coordinate the supply chain with different financing channels, such as the preferential bank loan, preferential trade credit and portfolio credit. In this paper, we conclude some critical findings. Firstly, we find that the retailer’s optimal would improve its optimal order quantity in the coordinated supply chain when he finances from a risk-pursuing bank or the manufacturer. Secondly, the retailer’s financial cost would be shared with the manufacturer whether the retailer utilises preferential trade credit or bank financing channel. Thirdly, the capital constraint retailer would prefer preferential trade credit to the other financing methods for the purpose that the preferential trade credit could improve the coordinated supply chain’s efficiency. Finally, we capture different impacts of collateral and risk preference on the supply chain. This article supplements the existing literature on supply chain finance with a preferential credit insight into the condition of the coordinated supply chain.

With over half a trillion dollars in trade credit flowing between firms in the United States, it is critically important for managers to understand how the trade credit that their firm receives and provides affect its value. Trade credit is a strategic investment in supply chain relationships that allows the recipient to make payment later rather than at the time of the sale. A firm provides trade credit to its downstream business customers and also receives trade credit from its upstream suppliers. Although research has shown that provided trade credit builds a firm’s shareholder value, it has not examined what effect, if any, received trade credit has on the firm’s value. As a result, one might assume that received trade credit affects firm value in the same manner as provided trade credit. We argue otherwise and show that received trade credit and provided trade credit have differential effects on firm value. Received trade credit has a negative direct effect and a positive indirect effect (through profit), whereas provided trade credit has a positive direct effect and a negative indirect effect. The difference in direct effects hinges on the disparate nature of dependence in the supply chain. Provided trade credit increases customers’ dependence on the firm, building the firm’s value. In contrast, received trade credit increases the firm’s dependence on its suppliers, destroying the firm’s value. Empirical results using a sample of 2804 firms from 1986 to 2017 provide robust support for the hypotheses. They show that managers risk overestimating the value of a 1 SD increase in received (provided) trade credit by $284.74 ($74.95) million, on average, if they do not consider both the direct and indirect effects it has on their firm’s value.

Purpose This study aims to examine the linear and non-linear effects of corporate social responsibility (CSR) engagement on trade receivables of listed firms in China. Furthermore, this paper analyzes whether CSR explains the provision for doubtful trade receivables. Design/methodology/approach The authors use a sample of listed firms in China over the period from 2008 to 2015. System generalized method of moments is used to estimate dynamic panel models. Findings CSR is positively related to trade receivables, in line with previous studies in this field. Nonetheless, the investigation of the non-linear effect of CSR reveals that CSR has an inverted U-shaped relationship with trade receivables. This implies that at low levels, CSR is more likely to be a tool to mitigate risk and/or build a trusting relationship between suppliers and buyers; whereas, at high levels, CSR is more prone to be subject to agency cost. The authors further find that CSR has a U-shaped relationship with the provision for bad trade receivables, which substantiates the above link between CSR and trade receivables. Originality/value Previous studies have extensively examined the link between trade credit extension and firm performance and determinants of trade credit. CSR can be connected to trade receivables in some ways, but very little effort has been exerted in verifying this relationship. In addition, CSR is linearly linked to trade receivables in previous literature, but theoretically, it can be expected to have a non-linear relationship with trade receivables. Furthermore, CSR has not been examined as a determinant of the provision for doubtful trade receivables. The authors aim to void the gaps here by using a sample of listed firms in China.

Crowdfunding has become an increasingly attractive way of financing for capital-constrained enterprises. It differs from traditional financing methods, such as bank credit and trade credit, along s...

This study investigates the substitution financing effect of suppliers’ trade credit on customers’ trade-credit using Chinese listed firms from 2009 to 2018. Results verify the substitution financing effect of suppliers’ trade credit on customers’ trade credit, indicating that firms with higher suppliers’ trade credit have lower customers’ trade credit. Moreover, suppliers’ trade-credit substitutes customers’ trade credit by alleviating financing constraints. Customer concentration weakens the substitution financing relation. Finally, the substitution financing effect of customers’ trade credit on bank credit is more pronounced than that of suppliers’ trade credit. As exogenous policy shock, the capital market liberalization has no significant impact on the substitution financing relation between heterogeneous trade credits. This study reveals that trade credit is heterogeneous rather than homogeneous. The substitution financing effect also exists in trade credit inside, which expands the existing literature’s understanding of trade credit and the substitution financing theory’s connotation.

This study investigates whether and how social security contributions affect corporate financing decisions. Treating the 2011 Social Insurance Law in China as a quasi-natural experiment, our difference-in-differences framework utilizes two-dimensional variations: initial social security contribution rates across firms (i.e., high vs. low) and year (i.e., before and after 2011). We find that more social security contributions cause firms to issue less debt in their capital structure, particularly firms with more severe labor market frictions, greater labor intensity, unhealthier financial status, tighter financial constraints, and those located in low-income areas with less developed financial systems and greater fiscal pressure. Mechanism tests show that firms’ operating leverage, bank credit default risk, and profitability volatility increase, while the supply of trade credit decreases, which is consistent with the financial distress hypothesis. The findings suggest that firms tend to choose conservative financing policies to mitigate the likelihood of financial distress caused by increasing social security contributions.

This paper studies wholesale price contracts with risk constraints in a supply chain consisting of a supplier and a capital-constrained retailer. A newsvendor-like retailer may borrow from a bank or use trade credit to fund his business. We construct a mean-variance model to analyze the decisions involved in the design of the wholesale price contract under both trade credit financing and bank credit financing. We characterize the conditions under which the supplier is willing to provide trade credit and those under which the retailer prefers bank credit or trade credit. We find that the supply chain member's risk aversion attitude plays an important role in determining the financing equilibrium. Contrasting with some existing studies, our results show that trade credit financing may lead to a win-win result only when the supplier's risk aversion threshold is moderate.

Accounts receivable, being both a sales and financial category, is a key aspect of the development of modern market relations. At the same time, accounts receivable has become a complex object of only microeconomic research. Insufficient knowledge of accounts receivable at the macro level determined the relevance of the research. The subject area of the research is the total accounts receivable of Russian organizations. The aim of the study is to group Russian regions and types of economic activities depending on the conditions of conducting sales and payment activities. The methodology consists of a systematic approach, which allowed a comprehensive review of the object of research and macroeconomic analysis, which ensured the reliability and validity of the conclusions of the work. As a result, the author defines the total accounts receivable of organizations in the economy as an independent object of macroeconomic research. Based on the results of the analysis for 2000–2019, the author concludes that there is a high degree of correlation between sales revenue and accounts receivable of Russian organizations, as well as the presence of trends in the increasing importance of accounts receivable in sales and the reduction of its overdue part in the finances of organizations. The share of accounts receivable in the total sales revenue of organizations is taken as a generalized characteristic of the conditions for doing business in the sales activities of organizations, and in payment activities — the share of overdue total accounts receivable of organizations. The author’s matrix for express assessment of the conditions for conducting sales and payment activities of organizations in the economy constitutes the scientific novelty of the study. It made it possible to group the types of activities, regions and districts of the Russian Federation, depending on the specified conditions. The prospect for future research of the total accounts receivable of organizations in the economy is the search for tools to determine its optimal volume and structure to timely identify the factors of the upcoming crises of non-payment and overproduction, both in the economy as a whole and in individual commodity markets.

We examine whether firms’ tax uncertainty affect their trade credit and inventory investment policies. Using a measure of tax uncertainty based on an accounting reserve for contingent tax liability...

This paper introduces the core enterprise into the traditional accounts receivable financing model, which only includes the bank and the small and medium-sized enterprise (SME), and further analyse...

This paper studies whether the bailout of downstream firms helps stop the supply chain propagation of business failure. By analyzing persistent zombie lending in China, we show that such a bailout policy does not work. Zombie lending to downstream firms does not reduce the exit likelihood of upstream firms. Worse, it distorts efficiency-based firm exit in upstream industries. The exit distortion effect works through the trade credit chain and is more profound in industries with stricter financial constraints and tighter supply chain connections. Our findings reveal the importance of credit allocation efficiency for the Schumpeterian process of creative destruction that is essential for economic growth.

This thesis contains three essays on empirical corporate finance. The first chapter focuses on the issue of underfunded corporate pension schemes and examines whether sponsors of defined-benefit schemes choose discount rates strategically to understate the funding deficits. I first show that methods used by previous studies to examine the question are subject to estimation biases. I formally derive the biases and perform simulations to quantify their impact on estimation results. I then develop a new approach to estimation that mitigates the biases. Empirical evidence suggests that sponsors with weaker funding status tend to select higher discount rates to understate pension deficits. I further show that sponsors with overfunded defined-benefit schemes have the propensity to assume a lower discount rate to understate funding surpluses, as the surplus may give rise to ‘visibility costs’. The second chapter examines the impact of institutional ownership on investment by private companies. I examine the impact of a broad spectrum of institutions and their ownership, including all types of private equity (PE) and venture capital (VC) funds, non-PE institutions (such as banks, insurance companies, and mutual funds) and shareholdings that represent minority as well as controlling ownership. I provide novel evidence that institutional investors promote intangible investment by established private firms through the alleviation of financing constraints. The effects are greater in firms with noncontrolling institutional ownership. This work broadens the evidence on the impact of institutional investors on the investment behaviours of private companies, as prior evidence has been limited to leveraged buyouts. It also highlights the importance of intangible investments, which has been understated by previous research. In the third chapter, I examine the impact of PE buyouts on the bargaining power of takeover targets relative to downstream customers. I document that buyout targets significantly reduce trade credit provision following the buyout and the reduction is greater when the target: operates in a more competitive industry; has ex-ante lower bargaining power, and when the private equity fund is larger. The evidence suggests that private equity investors elevate the bargaining power of buyout targets and enable them to provide less trade credit to customers. This chapter contributes to the literature on the impact of PE investors on portfolio firms and the debate on the determinants of trade credit provision. Previous studies argue that the level of financial constraints of suppliers is the primary determinant of trade credit provision. The evidence I presented in this chapter implies that bargaining power is a more important determinant than the degree of financial constraints, at least during normal periods when bank credit is not scarce.

The study examined the specific factors influencing the trade credit of foods and beverages manufacturing firms in Nigeria from 2011 to 2020. The specific objectives are, to investigate the effect of firm sales, debt financing, retained earnings, and profit on accounts payable of foods and beverages manufacturing firms in Nigeria. A sample of 7 firms was drawn from a population of 34 manufacturing firms listed on the Nigeria Stock Exchange during the period. Secondary data were collected from the annual reports and financial statements of the firms while multiple regression analysis was used to analyze the data. The overall result suggests that the entire model is significant in explaining the account payable of the foods and beverage manufacturing firms in Nigeria. Specific results indicate that firm sales, retained earnings, and profit for the year positively and significantly determined accounts payable of foods and beverage manufacturing firms in Nigeria. Also, debt financing negatively, but insignificantly determined the accounts payable of the firms. Given these results, the study recommended that foods and beverage manufacturing firms in Nigeria should improve their sales by producing high-quality products. It was also recommended that the firms in the country should reduce the number of debts in their capital structure to access more trade credit which is cheaper and more convenient to obtain. It was further recommended that firms should implement a retention policy that will increase retained earnings. Such a retention policy will assist the firms to access trade credit from inventory suppliers. It was finally recommended that the firms should improve their profitability through an increase in revenue generation and cost reduction. Profitable firms are favorably considered by suppliers for trade credit as indicated in the findings of the study.

In this study, we examine the association between interim financing and firm performance in an emerging economy. Prior research shows that firms utilize trade credit to boost their operating performance or market valuation. However, recent research on the relation between trade credit as alternative financing and firm performance provides mixed evidence. Nevertheless, limited research has been conducted in developing economies; hence, we attempt to fill this gap in the present paper. We argue that trade credit may not be attractive to external debt financing as trade credit may not contribute to business growth while external debt financing does. To test our conjecture, we employed ordinary least squares (OLS), firm fixed effects, and random effects regressions. By utilizing 1002 firm-year observations, our findings suggest a negative relationship between trade credit and firm performance. To check and control endogeneity and reverse causality issues we use instrumental variable approach (i.e., Heckman two-stage least squares regression). Our results remain robust through different measures of firm performance and trade credit. Our study provides policy implications and contributions to trade credit and firm performance literature.

Publisher Copyright: © 2022 by the authors. In times of crisis, cash and liquidity play an essential role. This paper analyzes the working capital measures over the course of a business cycle. We examine (1) how companies behave in economic downturns regarding their working capital components and (2) whether firms with higher financial constraints behave differently in economic downturns regarding their working capital components. The analyses were conducted with descriptive statistics and generalized linear mixed-effects modeling. Our dataset consists of 2111 stock-listed firms and 10,555 observations spread over the period of five years during the financial crisis era. The findings indicate that days sales outstanding and shorter days inventory held are related to better financial performance while days payable outstanding had no observable effect. Furthermore, financially constrained firms have shorter days sales outstanding than average firms. In economic downturns, firms seem to reduce both working capital and fixed investments to asset ratios. The financially constrained firms pushed down their fixed investments ratio more aggressively than average firms while, in contrast, the financially strongest firms pushed down the working capital to asset ratio in comparison to average firms. Interestingly, neither the cash conversion cycle, days payable outstanding, nor company performance or fixed investments to asset ratios fully returned to the pre-shock level. The behavior of non-financially constrained firms, which also perform better, indicates a stronger supply chain orientation than that of average firms. This might indicate that the supply chain-oriented view of working capital management could provide a more favorable and resilient alternative to the prevailing self-orientation.

In today's competitive business situation, the supplier frequently offers his or her retailers a permissible delay period to stimulate sales. In addition, the capacity of any warehouse is limited in practice; thus, the retailer needs an additional rented warehouse to store the excess units when the order quantity exceeds the capacity of the own warehouse. Furthermore, with the globalization of the marketing policy, the supplier may provide the retailer a discounted price if the quantity of purchase is large enough. Green inventory management reduces the environmental impacts of a business without lacking its profit. Considering all of the factors mentioned above, in this paper, we study a green economic order quantity model with capacity constraint under order-size-dependent trade credit and all-units discount along with minimizing carbon for a cleaner environment. The paper discusses all the potential cases, which may occur in green inventory models with carbon emission cost under different allowable delay in payments. Shortages are allowed and partially backordered. The main objective is to determine the sustainable optimal ordering strategies for retailers and decide whether a rented warehouse (RW) is to obtain ordering and replenishment policies for a retailer such that the retailer’s annual profit is maximized. First, we prove that the conditions of the objective functions have interior minimizer value and the closed-form optimal solution is found. Next, an algorithm is developed to determining the global optimal solution of the problem. Finally, some management insights are drawn by observing the applicability of the developed algorithm and also by performing sensitivity analyses on different parameters.

PurposeThe authors document a persistent negative link between contemporaneous trade credit provision and subsequent firm-level operating performance.Design/methodology/approachTextual analysis of firms' profile descriptions is used to study the role of market segmentation and product differentiation in intermediating the nexus between trade credit and corporate performance. The paper relies on dynamic panel regression modeling to investigate the postulated empirical relationships. This approach allows to address endogeneity issues and to test a number of different model specifications.FindingsDespite fueling short-term sales growth, the more generous trade credit terms are found to be associated with lower post hoc margins and declining overall business profitability. The market share is not affected by firms' proclivity to provide trade credit suggesting that the latter may not be effectively used as a long-term growth enhancement strategy. Firms' similarity to their competitors is found to play a salient role in altering the magnitude of the discovered negative relationship.Originality/valueThe authors find that the intensity of intra-industry competition measured by firms' similarity to their competitors magnifies the discovered negative trade credit-performance nexus. Therefore, generous trade credit may play a more important role in solidifying client–supplier relationships on the more segmented markets with a higher degree of product differentiation.

Credit policy is a set of temporary payment terms agreed between seller and buyer, in a form of credit. Credit expedites some of the complicated process organization experienced. Normally, the process required high level approval in order to complete procure activities or business transaction. In Malaysia, the credit policy has become one of the sales tools to secure more business, and identify new business opportunities. However, it is unsure to what extent the credit policy helps on firm performance. Thus, the aim of this study is to investigate the relation, the factors and the influence. The research tested on Malaysian manufacturers. A total of 35 survey questionnaires were received from Malaysian manufacturers and the data has been analysed using Statistical Package for Social Science (SPSS) software. Three out of four dimensional factors were rejected; credit structure, receivables management and inventory control. Only one of the factors was accepted and has significant impact on firm performance which is payables management. The results of the study revealed 41% of firm performance were depending on credit policy. This study fills the gap in the literature of credit policy conducted in Malaysia.

Nowadays, in a competitive market circumstance, a distributor/wholesaler permits a settled trade credit to the retailer(s) for more deal, and in turn, retailer offers a fraction of that credit period to the customers for the quick-moving of the business, i.e. to increase the demand. In reality, all the customers are not fully trustworthy. There are some customers who do not pay the dues after enjoying the trade credit. The number of default customers increases with the increase in trade credit period given to them. Thus, these two contradict each other. There is a decent market with increasing demand for greener (contamination free) item(s), especially for deteriorating item(s). Here, in the present investigation, customers’ demand increases with both the trade credit given to customers and the greenness of the product. Obviously, the price tag will be higher for green items. Increased price always negates the demand. Hence, greenness and the increased price of the green products are contradictory to each other. Once more, to reduce the deterioration rate, the retailer incurs an expenditure termed as preservation technology cost. Due to preservation, deterioration of the items decreases but cost increases. Here, control of deterioration and preservation act contradictory to each other. The base demand, effects (coefficients) of the trade credit, and greenness are taken as fuzzy. Incorporating the above facts, a model is developed with a fuzzy differential equation and solved by Chalco-Cano $$\alpha $$ -cut method. The profit is calculated by assuming two-level trade credit and default customers. In this investigation, a new concept of clearing the supplier’s dues is introduced. Instead of payment of all dues at the end of business cycle period, the retailer clears his dues as and when he has sufficient money for this purpose. Numerical experiments for different cases are performed along with their physical interpretations. Imprecise nature of the profit is shown through its membership function and depicted graphically. Interestingly, it is demonstrated that positive effect of deterioration due to the increase in preservation technology and increase in profit due to greenness are up to certain extent. After that, these have the reverse effects.