When do trade credit discounts matter? Evidence from Italian firm-level data
- 10 March 2005
- journal article
- research article
- Published by Informa UK Limited in Applied Economics
- Vol. 37 (4), 403-416
- https://doi.org/10.1080/0003684042000329063
Abstract
Italian firms are top users of trade credit in an international comparison. The paper offers some clues to the determinants of this stylized fact exploiting the answers of about 1900 manufacturing firms on a wide range of contractual features, separately for domestic and foreign customers. The main finding of the univariate analysis is that, with the almost totality of transactions made on credit, there is no evidence that this way of financing is more expensive than loans. An econometric investigation shows that discounts offered have the expected effect of reducing payment delays mostly for customers located abroad, where customary credit periods are shorter and creditors’ rights protection is more effective. The result is consistent with the poor explanatory power of discounts received in regressions for the trade debt period of domestic firms.Keywords
This publication has 12 references indexed in Scilit:
- Credit Management: An Examination of Policy Choices, Practices and Late Payment in UK CompaniesJournal of Business Finance & Accounting, 2001
- The Exploitation of Relationships in Financial Distress: The Case of Trade CreditThe Journal of Finance, 2000
- Evidence on the Determinants of Credit Terms Used in Interfirm TradeThe Journal of Finance, 1999
- Law and FinanceJournal of Political Economy, 1998
- Does trade credit redistribution thwart monetary policy? Evidence from ItalyApplied Economics, 1997
- Trade Credit: Theories and EvidenceThe Review of Financial Studies, 1997
- The Benefits of Lending Relationships: Evidence from Small Business DataThe Journal of Finance, 1994
- Vendor FinancingThe Journal of Finance, 1988
- Trade Credit and Informational AsymmetryThe Journal of Finance, 1987
- A Pure Financial Explanation for Trade CreditJournal of Financial and Quantitative Analysis, 1984