Market Power and the Matching of Trade Credit Terms
This paper studies the decision of firms to extend trade credit to customers and its relation with their financing decisions. The authors use a novel firm-level database of Chinese SMEs with unique information on market power in both output and inp...
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| Format: | Policy Research Working Paper |
| Language: | English |
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World Bank, Washington, DC
2012
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2008/10/9950546/market-power-matching-trade-credit-terms http://hdl.handle.net/10986/6913 |
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okr-10986-6913 |
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oai_dc |
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Digital Repository |
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Foreign Institution |
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Digital Repositories |
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World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English |
| topic |
ACCESS TO BANK LOANS ACCESS TO CREDIT ACCESS TO EXTERNAL FINANCE ACCESS TO FINANCE ACCESS TO FINANCING ACCESS TO FORMAL CREDIT ACCOUNTING ACCOUNTS PAYABLE ACCOUNTS PAYABLES ACCOUNTS RECEIVABLE ACCOUNTS RECEIVABLE FINANCING ACCOUNTS RECEIVABLES ADVERSE SELECTION ARBITRATION ASYMMETRIC INFORMATION AVAILABILITY OF BANK CREDIT BALANCE SHEET BANK CREDIT BANK FINANCING BANK INTEREST RATE BANK INTEREST RATES BANK LOAN BANK_FEE BANKING SECTOR BANKRUPTCY BANKS BARGAINING POWER BARRIERS TO GROWTH BIASES BORROWING BUSINESS CYCLE CAPITAL STRUCTURE CASH BALANCES CASH HOLDINGS CASH PAYMENT CENTRAL BANK COLLATERAL COMMERCIAL BANKS COMMERCIAL PAPER COMPETITIVE MARKET COMPETITIVE MARKETS COMPETITIVENESS CORPORATE DEBT CORPORATE FINANCE CORRUPTION COURT ACTION CREDIT CONSTRAINED FIRM CREDIT CONSTRAINED FIRMS CREDIT CONSTRAINTS CREDIT CONTRACT CREDIT CONTRACTS CREDIT DECISIONS CREDIT DEFAULTS CREDIT LINE CREDIT LINES CREDIT MARKET CREDIT PROVISION CREDIT RATIONING CREDIT RELATIONSHIP CREDIT RELATIONSHIPS CREDIT TERMS CREDITWORTHINESS CURRENT ASSETS CUSTOMER RELATIONSHIPS DEBT DEBT COLLECTORS DEBT ISSUES DEBT MATURITY DEFAULTS DEPENDENT DEVELOPING COUNTRIES DEVELOPING COUNTRY DOMESTIC MARKET DUMMY VARIABLE DUMMY VARIABLES EARNINGS ECONOMIC ACTIVITY ECONOMIC GROWTH EMERGING ECONOMIES EMERGING MARKET EMPLOYMENT ENTREPRENEURS EUROPEAN CENTRAL BANK EXCLUSION EXPLOITATION EXPORTER EXPORTERS EXPORTS EXTERNAL FINANCING FINANCIAL ACCESS FINANCIAL CONSTRAINT FINANCIAL CONSTRAINTS FINANCIAL CRISIS FINANCIAL DISTRESS FINANCIAL INDICATORS FINANCIAL INTERMEDIARIES FINANCIAL INTERMEDIARY FINANCIAL INTERMEDIATION FINANCIAL MANAGEMENT FINANCIAL SERVICES FINANCIAL STUDIES FINANCIAL SYSTEM FINANCING OF TRADE FIRM FINANCING FIXED ASSETS FOREIGN BANK FOREIGN BANKS FOREIGN FIRMS FOREIGN INVESTORS FORMAL BANK FORMAL FINANCE FUTURE RESEARCH GROWTH OPPORTUNITIES HOLDING HUMAN CAPITAL ILLIQUID FIRMS INFORMAL CREDIT INFORMAL FINANCING INFORMAL LOANS INFORMATION ON MARKET INFORMATION SYSTEMS INFORMATIONAL ASYMMETRY INSTITUTIONAL INVESTORS INSTRUMENT INSURANCE INTEREST RATE INTEREST RATES INTERNAL FUNDS INTERNATIONAL BANK INVENTORY INVESTMENT POLICY INVESTMENT PURPOSES JUDICIAL SYSTEM JUDICIARY LARGE FIRM LARGE FIRMS LAST RESORT LATE PAYMENTS LAWS LEGAL CONSTRAINTS LEGAL SYSTEM LEVERAGE LIABILITY LIABILITY SIDE LIMITED ACCESS LIMITED ACCESS TO BANK LINE OF CREDIT LIQUIDATION LIQUIDITY LIQUIDITY RISK LOAN OFFICERS LONG TERM DEBT LONG-TERM ASSETS LONG-TERM DEBT MARKET COMPETITION MARKET ENVIRONMENT MARKET FINANCE MARKET SHARE MARKET STRUCTURE MARKET STRUCTURES MARKETING STRATEGY MATCHING STRATEGY MATURITY STRUCTURE NEGOTIATION OVERDRAFT OVERDRAFT FACILITY OWNERSHIP STRUCTURES PAYMENT HISTORY PAYMENT TERMS PENALTIES PENALTY PERFORMANCE OF FIRMS PLANNED ECONOMIES PREPAYMENT PRIVATE FINANCIAL MARKETS PRODUCT MARKETS PROFITABILITY PROPERTY RIGHTS PROPERTY_RIGHT PROPERTY_RIGHTS PUBLIC POLICY RECEIPT RECEIPTS REPAYMENT RETAINED EARNINGS RISK MANAGEMENT RISK MANAGEMENT TOOL SHORT-TERM ASSET SHORT-TERM ASSETS SMALL BUSINESS SMALL BUSINESS FINANCE SOURCE OF FUNDS SOURCES OF FINANCE SUPPLY CHAIN SUPPLY CHAIN MANAGEMENT SUPPLY CHAINS TOTAL DEBT TRADE CREDIT TRADE FINANCE TRADE FINANCING TRADING TRANSACTION TRANSITION ECONOMIES UNION WORKING CAPITAL WRITTEN CONTRACTS |
| spellingShingle |
ACCESS TO BANK LOANS ACCESS TO CREDIT ACCESS TO EXTERNAL FINANCE ACCESS TO FINANCE ACCESS TO FINANCING ACCESS TO FORMAL CREDIT ACCOUNTING ACCOUNTS PAYABLE ACCOUNTS PAYABLES ACCOUNTS RECEIVABLE ACCOUNTS RECEIVABLE FINANCING ACCOUNTS RECEIVABLES ADVERSE SELECTION ARBITRATION ASYMMETRIC INFORMATION AVAILABILITY OF BANK CREDIT BALANCE SHEET BANK CREDIT BANK FINANCING BANK INTEREST RATE BANK INTEREST RATES BANK LOAN BANK_FEE BANKING SECTOR BANKRUPTCY BANKS BARGAINING POWER BARRIERS TO GROWTH BIASES BORROWING BUSINESS CYCLE CAPITAL STRUCTURE CASH BALANCES CASH HOLDINGS CASH PAYMENT CENTRAL BANK COLLATERAL COMMERCIAL BANKS COMMERCIAL PAPER COMPETITIVE MARKET COMPETITIVE MARKETS COMPETITIVENESS CORPORATE DEBT CORPORATE FINANCE CORRUPTION COURT ACTION CREDIT CONSTRAINED FIRM CREDIT CONSTRAINED FIRMS CREDIT CONSTRAINTS CREDIT CONTRACT CREDIT CONTRACTS CREDIT DECISIONS CREDIT DEFAULTS CREDIT LINE CREDIT LINES CREDIT MARKET CREDIT PROVISION CREDIT RATIONING CREDIT RELATIONSHIP CREDIT RELATIONSHIPS CREDIT TERMS CREDITWORTHINESS CURRENT ASSETS CUSTOMER RELATIONSHIPS DEBT DEBT COLLECTORS DEBT ISSUES DEBT MATURITY DEFAULTS DEPENDENT DEVELOPING COUNTRIES DEVELOPING COUNTRY DOMESTIC MARKET DUMMY VARIABLE DUMMY VARIABLES EARNINGS ECONOMIC ACTIVITY ECONOMIC GROWTH EMERGING ECONOMIES EMERGING MARKET EMPLOYMENT ENTREPRENEURS EUROPEAN CENTRAL BANK EXCLUSION EXPLOITATION EXPORTER EXPORTERS EXPORTS EXTERNAL FINANCING FINANCIAL ACCESS FINANCIAL CONSTRAINT FINANCIAL CONSTRAINTS FINANCIAL CRISIS FINANCIAL DISTRESS FINANCIAL INDICATORS FINANCIAL INTERMEDIARIES FINANCIAL INTERMEDIARY FINANCIAL INTERMEDIATION FINANCIAL MANAGEMENT FINANCIAL SERVICES FINANCIAL STUDIES FINANCIAL SYSTEM FINANCING OF TRADE FIRM FINANCING FIXED ASSETS FOREIGN BANK FOREIGN BANKS FOREIGN FIRMS FOREIGN INVESTORS FORMAL BANK FORMAL FINANCE FUTURE RESEARCH GROWTH OPPORTUNITIES HOLDING HUMAN CAPITAL ILLIQUID FIRMS INFORMAL CREDIT INFORMAL FINANCING INFORMAL LOANS INFORMATION ON MARKET INFORMATION SYSTEMS INFORMATIONAL ASYMMETRY INSTITUTIONAL INVESTORS INSTRUMENT INSURANCE INTEREST RATE INTEREST RATES INTERNAL FUNDS INTERNATIONAL BANK INVENTORY INVESTMENT POLICY INVESTMENT PURPOSES JUDICIAL SYSTEM JUDICIARY LARGE FIRM LARGE FIRMS LAST RESORT LATE PAYMENTS LAWS LEGAL CONSTRAINTS LEGAL SYSTEM LEVERAGE LIABILITY LIABILITY SIDE LIMITED ACCESS LIMITED ACCESS TO BANK LINE OF CREDIT LIQUIDATION LIQUIDITY LIQUIDITY RISK LOAN OFFICERS LONG TERM DEBT LONG-TERM ASSETS LONG-TERM DEBT MARKET COMPETITION MARKET ENVIRONMENT MARKET FINANCE MARKET SHARE MARKET STRUCTURE MARKET STRUCTURES MARKETING STRATEGY MATCHING STRATEGY MATURITY STRUCTURE NEGOTIATION OVERDRAFT OVERDRAFT FACILITY OWNERSHIP STRUCTURES PAYMENT HISTORY PAYMENT TERMS PENALTIES PENALTY PERFORMANCE OF FIRMS PLANNED ECONOMIES PREPAYMENT PRIVATE FINANCIAL MARKETS PRODUCT MARKETS PROFITABILITY PROPERTY RIGHTS PROPERTY_RIGHT PROPERTY_RIGHTS PUBLIC POLICY RECEIPT RECEIPTS REPAYMENT RETAINED EARNINGS RISK MANAGEMENT RISK MANAGEMENT TOOL SHORT-TERM ASSET SHORT-TERM ASSETS SMALL BUSINESS SMALL BUSINESS FINANCE SOURCE OF FUNDS SOURCES OF FINANCE SUPPLY CHAIN SUPPLY CHAIN MANAGEMENT SUPPLY CHAINS TOTAL DEBT TRADE CREDIT TRADE FINANCE TRADE FINANCING TRADING TRANSACTION TRANSITION ECONOMIES UNION WORKING CAPITAL WRITTEN CONTRACTS Fabbri, Daniela Klapper, Leora Market Power and the Matching of Trade Credit Terms |
| relation |
Policy Research Working Paper; No. 4754 |
| description |
This paper studies the decision of firms
to extend trade credit to customers and its relation with
their financing decisions. The authors use a novel
firm-level database of Chinese SMEs with unique information
on market power in both output and input markets and on the
amount, terms, and payment history of trade credit
simultaneously extended to customers (accounts receivable)
and received from suppliers (accounts payable). The analysis
shows that suppliers with relatively weaker market power are
more likely to extend trade credit and have a larger share
of goods sold on credit. Examination of the importance of
financial constraints reveals that access to bank financing
and profitability are not significantly related to trade
credit supply. Rather, firms that receive trade credit from
their own suppliers are more likely to extend trade credit
to their customers, and to "match maturity"
between the contract terms of payables and receivables. This
matching practice is more likely used when firms face strong
competition in the product market (relative to their
customers), and enjoy strong market power in the input
market (relative to their suppliers). These results
highlight the importance of supply chain financing for
market competition and risk management in credit constrained firms. |
| format |
Publications & Research :: Policy Research Working Paper |
| author |
Fabbri, Daniela Klapper, Leora |
| author_facet |
Fabbri, Daniela Klapper, Leora |
| author_sort |
Fabbri, Daniela |
| title |
Market Power and the Matching of Trade Credit Terms |
| title_short |
Market Power and the Matching of Trade Credit Terms |
| title_full |
Market Power and the Matching of Trade Credit Terms |
| title_fullStr |
Market Power and the Matching of Trade Credit Terms |
| title_full_unstemmed |
Market Power and the Matching of Trade Credit Terms |
| title_sort |
market power and the matching of trade credit terms |
| publisher |
World Bank, Washington, DC |
| publishDate |
2012 |
| url |
http://documents.worldbank.org/curated/en/2008/10/9950546/market-power-matching-trade-credit-terms http://hdl.handle.net/10986/6913 |
| _version_ |
1764401316554080256 |
| spelling |
okr-10986-69132021-04-23T14:02:32Z Market Power and the Matching of Trade Credit Terms Fabbri, Daniela Klapper, Leora ACCESS TO BANK LOANS ACCESS TO CREDIT ACCESS TO EXTERNAL FINANCE ACCESS TO FINANCE ACCESS TO FINANCING ACCESS TO FORMAL CREDIT ACCOUNTING ACCOUNTS PAYABLE ACCOUNTS PAYABLES ACCOUNTS RECEIVABLE ACCOUNTS RECEIVABLE FINANCING ACCOUNTS RECEIVABLES ADVERSE SELECTION ARBITRATION ASYMMETRIC INFORMATION AVAILABILITY OF BANK CREDIT BALANCE SHEET BANK CREDIT BANK FINANCING BANK INTEREST RATE BANK INTEREST RATES BANK LOAN BANK_FEE BANKING SECTOR BANKRUPTCY BANKS BARGAINING POWER BARRIERS TO GROWTH BIASES BORROWING BUSINESS CYCLE CAPITAL STRUCTURE CASH BALANCES CASH HOLDINGS CASH PAYMENT CENTRAL BANK COLLATERAL COMMERCIAL BANKS COMMERCIAL PAPER COMPETITIVE MARKET COMPETITIVE MARKETS COMPETITIVENESS CORPORATE DEBT CORPORATE FINANCE CORRUPTION COURT ACTION CREDIT CONSTRAINED FIRM CREDIT CONSTRAINED FIRMS CREDIT CONSTRAINTS CREDIT CONTRACT CREDIT CONTRACTS CREDIT DECISIONS CREDIT DEFAULTS CREDIT LINE CREDIT LINES CREDIT MARKET CREDIT PROVISION CREDIT RATIONING CREDIT RELATIONSHIP CREDIT RELATIONSHIPS CREDIT TERMS CREDITWORTHINESS CURRENT ASSETS CUSTOMER RELATIONSHIPS DEBT DEBT COLLECTORS DEBT ISSUES DEBT MATURITY DEFAULTS DEPENDENT DEVELOPING COUNTRIES DEVELOPING COUNTRY DOMESTIC MARKET DUMMY VARIABLE DUMMY VARIABLES EARNINGS ECONOMIC ACTIVITY ECONOMIC GROWTH EMERGING ECONOMIES EMERGING MARKET EMPLOYMENT ENTREPRENEURS EUROPEAN CENTRAL BANK EXCLUSION EXPLOITATION EXPORTER EXPORTERS EXPORTS EXTERNAL FINANCING FINANCIAL ACCESS FINANCIAL CONSTRAINT FINANCIAL CONSTRAINTS FINANCIAL CRISIS FINANCIAL DISTRESS FINANCIAL INDICATORS FINANCIAL INTERMEDIARIES FINANCIAL INTERMEDIARY FINANCIAL INTERMEDIATION FINANCIAL MANAGEMENT FINANCIAL SERVICES FINANCIAL STUDIES FINANCIAL SYSTEM FINANCING OF TRADE FIRM FINANCING FIXED ASSETS FOREIGN BANK FOREIGN BANKS FOREIGN FIRMS FOREIGN INVESTORS FORMAL BANK FORMAL FINANCE FUTURE RESEARCH GROWTH OPPORTUNITIES HOLDING HUMAN CAPITAL ILLIQUID FIRMS INFORMAL CREDIT INFORMAL FINANCING INFORMAL LOANS INFORMATION ON MARKET INFORMATION SYSTEMS INFORMATIONAL ASYMMETRY INSTITUTIONAL INVESTORS INSTRUMENT INSURANCE INTEREST RATE INTEREST RATES INTERNAL FUNDS INTERNATIONAL BANK INVENTORY INVESTMENT POLICY INVESTMENT PURPOSES JUDICIAL SYSTEM JUDICIARY LARGE FIRM LARGE FIRMS LAST RESORT LATE PAYMENTS LAWS LEGAL CONSTRAINTS LEGAL SYSTEM LEVERAGE LIABILITY LIABILITY SIDE LIMITED ACCESS LIMITED ACCESS TO BANK LINE OF CREDIT LIQUIDATION LIQUIDITY LIQUIDITY RISK LOAN OFFICERS LONG TERM DEBT LONG-TERM ASSETS LONG-TERM DEBT MARKET COMPETITION MARKET ENVIRONMENT MARKET FINANCE MARKET SHARE MARKET STRUCTURE MARKET STRUCTURES MARKETING STRATEGY MATCHING STRATEGY MATURITY STRUCTURE NEGOTIATION OVERDRAFT OVERDRAFT FACILITY OWNERSHIP STRUCTURES PAYMENT HISTORY PAYMENT TERMS PENALTIES PENALTY PERFORMANCE OF FIRMS PLANNED ECONOMIES PREPAYMENT PRIVATE FINANCIAL MARKETS PRODUCT MARKETS PROFITABILITY PROPERTY RIGHTS PROPERTY_RIGHT PROPERTY_RIGHTS PUBLIC POLICY RECEIPT RECEIPTS REPAYMENT RETAINED EARNINGS RISK MANAGEMENT RISK MANAGEMENT TOOL SHORT-TERM ASSET SHORT-TERM ASSETS SMALL BUSINESS SMALL BUSINESS FINANCE SOURCE OF FUNDS SOURCES OF FINANCE SUPPLY CHAIN SUPPLY CHAIN MANAGEMENT SUPPLY CHAINS TOTAL DEBT TRADE CREDIT TRADE FINANCE TRADE FINANCING TRADING TRANSACTION TRANSITION ECONOMIES UNION WORKING CAPITAL WRITTEN CONTRACTS This paper studies the decision of firms to extend trade credit to customers and its relation with their financing decisions. The authors use a novel firm-level database of Chinese SMEs with unique information on market power in both output and input markets and on the amount, terms, and payment history of trade credit simultaneously extended to customers (accounts receivable) and received from suppliers (accounts payable). The analysis shows that suppliers with relatively weaker market power are more likely to extend trade credit and have a larger share of goods sold on credit. Examination of the importance of financial constraints reveals that access to bank financing and profitability are not significantly related to trade credit supply. Rather, firms that receive trade credit from their own suppliers are more likely to extend trade credit to their customers, and to "match maturity" between the contract terms of payables and receivables. This matching practice is more likely used when firms face strong competition in the product market (relative to their customers), and enjoy strong market power in the input market (relative to their suppliers). These results highlight the importance of supply chain financing for market competition and risk management in credit constrained firms. 2012-06-01T19:14:36Z 2012-06-01T19:14:36Z 2008-10 http://documents.worldbank.org/curated/en/2008/10/9950546/market-power-matching-trade-credit-terms http://hdl.handle.net/10986/6913 English Policy Research Working Paper; No. 4754 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research |