id okr-10986-7477
recordtype oai_dc
spelling okr-10986-74772021-04-23T14:02:33Z Customer Market Power and the Provision of Trade Credit : Evidence from Eastern Europe and Central Asia Van Horen, Neeltje ACCOUNTING AFFILIATED ORGANIZATIONS ASYMMETRIC INFORMATION BORROWING BORROWING CONSTRAINTS CENTRAL BANK COMMERCIAL CREDIT COMPETITIVENESS CONSUMER SURPLUS DEBT DOMESTIC MARKET ECONOMIC PERFORMANCE ECONOMICS EXPECTED VALUE EXPORTS FINANCIAL CONTRACTS FINANCIAL INTERMEDIARIES FINANCIAL MANAGEMENT FINANCIAL SECTOR GDP GDP PER CAPITA GROWTH RATE INFLATION INSURANCE INTERNATIONAL TRADE INVESTMENT CLIMATE LESS DEVELOPED COUNTRY MARKET COMPETITION MARKET POWER MONETARY POLICY MONOPOLY MORAL HAZARD PRICE DISCRIMINATION PRICE INCREASE PRICE REGULATION PRODUCT QUALITY PRODUCTION COSTS PROPERTY RIGHTS PURCHASING REAL GDP REGRESSION ANALYSIS RETAIL RISK EXPOSURE SALE SALES SMALL BUSINESS SUBSTITUTES SUPPLIER SUPPLIERS TOTAL SALES TRADE CREDIT TRADE CREDITORS WORKING CAPITAL Statistics show that the sale of goods on credit is widespread among firms even when they are capital constrained and thus face relatively high costs in providing trade credit. This study provides an explanation for this by arguing that customers who possess strong market power are able to increase their customer surplus by demanding to purchase the goods on credit. This gain in customer surplus increases with the degree of asymmetric information between buyer and seller with respect to product quality. Therefore, firms that are perceived as risky are especially subject to the market power of the customer and have to sell their goods on credit. Using detailed firm-level data from a large number of firms in Eastern Europe and Central Asia, this study finds evidence consistent with this hypothesis. It finds a strong positive correlation between customer market power and trade credit provision. Furthermore, this relationship is especially strong when the supplier is more risky and in countries with limited financial sector development or a weak legal system. 2012-06-07T21:44:21Z 2012-06-07T21:44:21Z 2007-07 http://documents.worldbank.org/curated/en/2007/07/7965080/customer-market-power-provision-trade-credit-evidence-eastern-europe-central-asia http://hdl.handle.net/10986/7477 English Policy Research Working Paper; No. 4284 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 Europe and Central Asia
repository_type Digital Repository
institution_category Foreign Institution
institution Digital Repositories
building World Bank Open Knowledge Repository
collection World Bank
language English
topic ACCOUNTING
AFFILIATED ORGANIZATIONS
ASYMMETRIC INFORMATION
BORROWING
BORROWING CONSTRAINTS
CENTRAL BANK
COMMERCIAL CREDIT
COMPETITIVENESS
CONSUMER SURPLUS
DEBT
DOMESTIC MARKET
ECONOMIC PERFORMANCE
ECONOMICS
EXPECTED VALUE
EXPORTS
FINANCIAL CONTRACTS
FINANCIAL INTERMEDIARIES
FINANCIAL MANAGEMENT
FINANCIAL SECTOR
GDP
GDP PER CAPITA
GROWTH RATE
INFLATION
INSURANCE
INTERNATIONAL TRADE
INVESTMENT CLIMATE
LESS DEVELOPED COUNTRY
MARKET COMPETITION
MARKET POWER
MONETARY POLICY
MONOPOLY
MORAL HAZARD
PRICE DISCRIMINATION
PRICE INCREASE
PRICE REGULATION
PRODUCT QUALITY
PRODUCTION COSTS
PROPERTY RIGHTS
PURCHASING
REAL GDP
REGRESSION ANALYSIS
RETAIL
RISK EXPOSURE
SALE
SALES
SMALL BUSINESS
SUBSTITUTES
SUPPLIER
SUPPLIERS
TOTAL SALES
TRADE CREDIT
TRADE CREDITORS
WORKING CAPITAL
spellingShingle ACCOUNTING
AFFILIATED ORGANIZATIONS
ASYMMETRIC INFORMATION
BORROWING
BORROWING CONSTRAINTS
CENTRAL BANK
COMMERCIAL CREDIT
COMPETITIVENESS
CONSUMER SURPLUS
DEBT
DOMESTIC MARKET
ECONOMIC PERFORMANCE
ECONOMICS
EXPECTED VALUE
EXPORTS
FINANCIAL CONTRACTS
FINANCIAL INTERMEDIARIES
FINANCIAL MANAGEMENT
FINANCIAL SECTOR
GDP
GDP PER CAPITA
GROWTH RATE
INFLATION
INSURANCE
INTERNATIONAL TRADE
INVESTMENT CLIMATE
LESS DEVELOPED COUNTRY
MARKET COMPETITION
MARKET POWER
MONETARY POLICY
MONOPOLY
MORAL HAZARD
PRICE DISCRIMINATION
PRICE INCREASE
PRICE REGULATION
PRODUCT QUALITY
PRODUCTION COSTS
PROPERTY RIGHTS
PURCHASING
REAL GDP
REGRESSION ANALYSIS
RETAIL
RISK EXPOSURE
SALE
SALES
SMALL BUSINESS
SUBSTITUTES
SUPPLIER
SUPPLIERS
TOTAL SALES
TRADE CREDIT
TRADE CREDITORS
WORKING CAPITAL
Van Horen, Neeltje
Customer Market Power and the Provision of Trade Credit : Evidence from Eastern Europe and Central Asia
geographic_facet Europe and Central Asia
relation Policy Research Working Paper; No. 4284
description Statistics show that the sale of goods on credit is widespread among firms even when they are capital constrained and thus face relatively high costs in providing trade credit. This study provides an explanation for this by arguing that customers who possess strong market power are able to increase their customer surplus by demanding to purchase the goods on credit. This gain in customer surplus increases with the degree of asymmetric information between buyer and seller with respect to product quality. Therefore, firms that are perceived as risky are especially subject to the market power of the customer and have to sell their goods on credit. Using detailed firm-level data from a large number of firms in Eastern Europe and Central Asia, this study finds evidence consistent with this hypothesis. It finds a strong positive correlation between customer market power and trade credit provision. Furthermore, this relationship is especially strong when the supplier is more risky and in countries with limited financial sector development or a weak legal system.
format Publications & Research :: Policy Research Working Paper
author Van Horen, Neeltje
author_facet Van Horen, Neeltje
author_sort Van Horen, Neeltje
title Customer Market Power and the Provision of Trade Credit : Evidence from Eastern Europe and Central Asia
title_short Customer Market Power and the Provision of Trade Credit : Evidence from Eastern Europe and Central Asia
title_full Customer Market Power and the Provision of Trade Credit : Evidence from Eastern Europe and Central Asia
title_fullStr Customer Market Power and the Provision of Trade Credit : Evidence from Eastern Europe and Central Asia
title_full_unstemmed Customer Market Power and the Provision of Trade Credit : Evidence from Eastern Europe and Central Asia
title_sort customer market power and the provision of trade credit : evidence from eastern europe and central asia
publisher World Bank, Washington, DC
publishDate 2012
url http://documents.worldbank.org/curated/en/2007/07/7965080/customer-market-power-provision-trade-credit-evidence-eastern-europe-central-asia
http://hdl.handle.net/10986/7477
_version_ 1764402129270734848