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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.

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.

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.

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.

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 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.

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.

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 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.

We explore the supply chain network design problem for a retailer selling perishable products when the supplier provides trade credit and the deterioration rate can be reduced by freshness-keeping ...

Capital constraint, immensely existing in practice, became major stressors for manufacturers during the green research and development (R & D) triggered by managers integrating green concept into their business models. Considering the initial capital of a capital-constrained manufacturer, this paper formulates a Stackelberg game model comprising a manufacturer and a retailer, to discuss the optimal operation and financing decisions under the bank financing channel and trade credit financing channel, to detect the relationship between the manufacturer’s initial capital and green R & D investment, and to find which financing channel is better by comparing the two financing channels when the same initial capital is set. According to the above analysis, the results find that the capital-constrained manufacturer prefers financing only when meeting certain conditions. Furthermore, financing might be detrimental to the manufacturer but always beneficial to the retailer. Especially, under trade credit financing channel, the profit improvement of the retailer is higher than the manufacturer in the same financing channel, which suggests that the retailer has strong internal motivation to cooperate with the manufacturer from the perspective of financing.

We extend standard models of price pass-through in an imperfectly competitive supply chain to incorporate rationing of trade credit. Credit rationing reverses predictions concerning effects of raw material import prices on pass-through to wholesale prices, and effects of regulations of intermediaries. To test these we study the effects of a policy in Bangladesh's edible oils supply chain during 2011-12 banning a layer of financing intermediaries. Evidence from a difference-in-difference estimation rejects the standard model. We find that the regulatory effort to reduce market power of financing intermediaries ended up raising consumer prices by restricting access to credit of downstream traders. Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

This study examines the effects of dynamic discounting based credit payment on a supply chain network design problem. Dynamic discounting based credit payment is a supply chain finance policy wherein the supplier provides a credit period to a distribution center (DC) with a discount applied if the DC pays the supplier before the end of the credit period. This study also considers the time value of money and applies discounted cash flows to formulate a model that determines the DC’s optimal replenishment cycle, selling price, and influence area while maximizing the present value of the total profit. The continuous approximation approach is applied to formulate a mathematical model of the problems, and an algorithm based on non-linear optimization is established to solve the problem. A numerical example and a sensitivity analysis are provided to present the proposed model and solution approach and to illustrate the effect of each cost on the decisions and profit.

PurposeThis study investigates how a firm's structural embeddedness, the structural position in a supply network that consists of major customers, influences the acquisition of supplier trade credit. Specifically, this study examines how network interconnectedness, network integration and network independence of a firm affect its ability to acquire supplier trade credit.Design/methodology/approachThis study utilizes financial data from Compustat to build a longitudinal dataset of manufacturing firms from 1998 to 2013. Customer segment disclosure data are used to construct firm-level network variables. A fixed effect regression approach is used for estimation.FindingsThe study results show that network interconnectedness is negatively associated with supplier trade credit, while network integration is positively associated with supplier trade credit. Network independence does not influence the extent of supplier trade credit. The post hoc analysis shows that the effects of the hypothesized factors vary under different product categories and credit ratings.Originality/valueThis study broadens the supply chain finance literature by showing how a firm's embedded network structural position can influence its ability to obtain supplier trade credit.

Purpose This study aims to explore changes in working capital management (WCM) practices in response to economic downturns, especially during the coronavirus pandemic. Design/methodology/approach This study adopts an interpretative approach. This paper used semi-structured interviews with 2 finance directors and 13 top managers for data collection. This paper used thematic analysis for analysing the interview data. Findings The study findings suggest that the traditional ways of managing working capital may no longer be sufficient during a crisis. Instead, dynamic financing, trade credit policy and continuous staff training to develop new skills are alternative WCM practices to navigate the challenges of a crisis. Further, this paper finds that economic conditions, such as inflation rates, interest rates, exchange rates and government policy, negatively affect WCM. Practical implications The study findings highlight practical issues that may help firms meet their present and future financing needs, manage their day-to-day operational activities and enhance performance, both operational and financial. The study is beneficial for regulators in understanding a firm’s constraints during crises and respond appropriately. Originality/value This is the first study, to the best of the knowledge that uses a qualitative approach to investigate the impact of economic downturns on WCM practices of firms. Thus, this study offers new insights into the fundamentals of WCM practices during crises.

This article explores the creation, circulation, and regulation of informal trade credit or “ograyi” in Afghanistan. The practice ofograyiallows businesses to access short-term credit, from either their suppliers or third parties, to acquire specified goods. This paper provides an account of the non-legal practices that regulateograyitransactions.Ograyivitally depends on the development of trust between parties. Clientelism helps to maintain stable relationships that can offset market unpredictability. Widespread market norms and practices establish the general behaviour of participants. Parties also renegotiate the terms of the contract if circumstances make it impossible for the creditor to repay the loan in the agreed timeframe. Furthermore, bank credit remains largely unavailable or unappealing to many businesses, and the legal system provides limited recourse in the case of contractual breach. Thus, the non-legal practices regulatingograyiserve as a substitute for legal coercion.

The emergence of the COVID-19 pandemic has undoubtedly caused many perturbations, at the same time hindering the functioning and operation of enterprises from various industries, which, due to the often inability to conduct business, found themselves in a very difficult financial situation, with a difficult ability to settle their liabilities. Too high share of receivables that are not settled in a timely manner can result in various problems for enterprises, including, in particular, financial problems that can lead to large-scale bankruptcy. Considering a huge number of connections between individual entities, the bankruptcy of one may pose a risk of a wave of bankruptcy of others. The paper aims to analyze the impact of the COVID-19 pandemic on the payment situation of Polish enterprises. The research was conducted on the basis of an analysis of data on the payment situation of Polish enterprises from selected industries. Basic descriptive statistics was used in the study to characterize the material. The nonparametric Wilcoxon pair order test, which is the equivalent of the Student's t-test for related variables, was used for the research. The research proved that at enterprises from almost every industry, the value of debts at the end of the second quarter of 2020 was higher than in the first quarter. It can therefore be concluded that the outbreak of the pandemic contributed to an increase in arrears, which, in turn, resulted in an increased risk of doing business. The greater the share of arrears with contractors, the greater the risk of financial problems at the enterprise, and hence the increased risk of bankruptcy. © 2021 Robert Dankiewicz, Bartlomiej Balawejder, Tomasz Tomczyk, Viktor Trynchuk.

Purpose: Trade credit is one of the main sources of funding for global companies. The importance of trade credit can also be seen from the proportion of investment that is financed through it. Despite the potential importance of trade credit, limited attention has been paid to its role and use, especially in developing countries. The main aim of the study was to establish the determinants of trade credit and moderating role of the age of the firms listed in Nairobi securities exchange. Methodology: The study adopted an explanatory research design which was guided by both the transaction cost and the credit substitution theories. The study was based in firms listed on the Nairobi securities exchange for the period 2012 to 2013 and used document analysis to collect secondary data from the company’s annual report. Data were analysed through the use of descriptive statistics and inferential statistics methods. Results: The study findings indicated that debt levels (β1 = 0.5422, ρ 0.05) have an insignificant effect. On the other hand, firm age has a significant moderating effect on the relationship between determinants and trade credit. In particular, firm’s age has significant interaction effect on debt level (β6 = -2.3609, p < 0.05), the interaction effects on liquidity (β8 = -2.4649, p < 0.05). Unique Contribution to Theory, Practice and Theory: Firms need to establish a well-defined trade-credit granting criteria to assess the creditworthiness of the buyers to avoid default risk or late payment by buyers. Firms should be cautious while pledging an asset as collateral since the bank has exclusive access to pertinent information. Also, firms should hold liquid assets to meet their financial obligations. There is also a need for firms to transform the raw material supplied into finished goods so that suppliers’ advantage in repossessing and selling supplied goods is reduced. The study also contributes to credit substitution theory by indicating the possibility of using internal equity or external debt financing that cannot be undervalued in the market.

Banu and Mondal proposed an integrated inventory model with/without manufacturer’s product warranty and customer’s trade credit. Their model needs to obtain the optimal product warranty, retailer’s...

Practically, two-level trade credit is usually applied to stimulate the retailer’s order incentive for deteriorating items with expiration date. Nevertheless, previous studies ignore to identify bo...

In this work, the authors proposes the modified Banu and Mondal’s model for obtaining the optimal process mean, quality investment, replenishment cycle time, and trade credit period. Assume that th...