Trade Credit Contracts

The authors employ a novel dataset on almost 30,000 trade credit contracts to describe the broad characteristics of the parties that contract together; the key contractual terms, such as the discount for early payment; and the days by when payment...

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Bibliographic Details
Main Authors:	Klapper, Leora, Laeven, Luc, Rajan, Raghuram
Format:	Policy Research Working Paper
Language:	English
Published:	2012
Subjects:	ACCESS TO CREDIT ACCESS TO FINANCE ACCESS TO FINANCING ACCOUNTS PAYABLE ACCOUNTS RECEIVABLE ACCOUNTS RECEIVABLES ADVERSE SELECTION AFFILIATED ORGANIZATIONS ANALYSIS OF VARIANCE ASYMMETRIC INFORMATION BALANCE SHEET BANK CREDIT BANKS BARGAINING POWER BILATERAL CONTRACT BORROWING BORROWING COSTS CAPITAL STRUCTURE CENTRAL BANK COLLATERAL COMPARATIVE ADVANTAGE COMPETITIVENESS CONTRACTUAL TERMS CREDIT CONSTRAINED FIRMS CREDIT CONTRACT CREDIT CONTRACTS CREDIT DEFAULTS CREDIT LOSSES CREDIT MARKET CREDIT PORTFOLIO CREDIT PROVISION CREDIT QUALITY CREDIT RATING CREDIT RATIONING CREDIT RELATIONSHIPS CREDIT RISK CREDIT TERMS CREDITS CREDITWORTHINESS CURRENCY DEBT DEBT COLLECTORS DEBT MATURITY DEFAULT RISK DEPENDENT DEVELOPING COUNTRIES DEVELOPMENT POLICY DISCOUNT RATE DISCRIMINATION DUMMY VARIABLE DURABLE DURABLE GOODS EXPLOITATION EXPORTER EXTERNAL FINANCING FEDERAL RESERVE FINANCES FINANCIAL CRISES FINANCIAL CRISIS FINANCIAL DISTRESS FINANCIAL INSTITUTIONS FINANCIAL INTERMEDIARIES FINANCIAL INTERMEDIARY FINANCIAL MANAGEMENT FINANCIAL MARKETS FINANCIAL RISK FINANCIAL RISKS FINANCIAL SHOCKS FINANCIAL STUDIES FINANCIERS FINANCING CONSTRAINTS FINANCING COSTS FOREIGN COURTS GREATER ACCESS GUARANTEE PRODUCT GUARANTY IMPORT DUTIES INFORMAL CREDIT INFORMATIONAL ASYMMETRY INSURANCE INTEREST RATE INTEREST RATES INTERNATIONAL BANK INTERNATIONAL FIRMS INTERNATIONAL TRADE INTRINSIC VALUE INVENTORY INVENTORY MANAGEMENT INVESTMENT RATING JURISDICTIONS LARGE FIRMS LIQUIDATION LIQUIDATION OF ASSETS LIQUIDITY MARKET COMPETITION MATURITIES MATURITY MISREPORTING MONETARY FUND MULTINATIONAL MULTINATIONAL FIRMS NONPAYMENT PAYMENT TERMS PERFORMANCE BOND PERISHABLE GOODS PORTFOLIO PRICE DISCRIMINATION PROMPT PAYMENTS PROPRIETARY INFORMATION REGRESSION ANALYSIS RISK MANAGEMENT RISK OF DEFAULT SMALL BUSINESS SMALL BUSINESS FINANCE SMALL BUSINESS FINANCES SUPPLY CHAIN SWAP TERM CREDIT TRADE CREDIT TRADE FINANCE TRANSACTION TRANSACTIONS COSTS TURNOVER WORKING CAPITAL
Online Access:	http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20110718142731 http://hdl.handle.net/10986/3490

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Summary:	The authors employ a novel dataset on almost 30,000 trade credit contracts to describe the broad characteristics of the parties that contract together; the key contractual terms, such as the discount for early payment; and the days by when payment is due. Whereas prior work has typically used information on only one side of the buyer-seller transaction, this paper utilizes information on both. The authors find that the largest and most creditworthy buyers receive contracts with the longest maturities from smaller suppliers, with the latter extending credit to the former perhaps as a way of certifying product quality. Discounts for early payment seem to be offered to riskier buyers to limit the potential nonpayment risk when credit is extended for non-financial reasons.

Trade Credit Contracts

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