Customer Market Power And The Provision Of Trade Credit PDF Download
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Author | : Neeltje van Horen |
Publisher | : World Bank Publications |
Total Pages | : 27 |
Release | : 2007 |
Genre | : Access to Finance |
ISBN | : |
Download Customer Market Power and the Provision of Trade Credit Book in PDF, ePub and Kindle
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.
Author | : Neeltje van Horen |
Publisher | : |
Total Pages | : 27 |
Release | : 2016 |
Genre | : |
ISBN | : |
Download Customer Market Power and the Provision of Trade Credit Book in PDF, ePub and Kindle
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.
Author | : Daniela Fabbri |
Publisher | : |
Total Pages | : 52 |
Release | : 2016 |
Genre | : |
ISBN | : |
Download Market Power and the Matching of Trade Credit Terms Book in PDF, ePub and Kindle
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 quot;match maturityquot; 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.
Author | : |
Publisher | : |
Total Pages | : |
Release | : 2008 |
Genre | : Credit |
ISBN | : |
Download Market Power and the Matching of Trade Credit Terms Book in PDF, ePub and Kindle
"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."--World Bank web site.
Author | : Neeltje van Horen |
Publisher | : World Bank Publications |
Total Pages | : 27 |
Release | : 2007 |
Genre | : |
ISBN | : |
Download Customer Market Power and the Provision of Trade Credit Book in PDF, ePub and Kindle
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.
Author | : Raymond Fisman |
Publisher | : World Bank Publications |
Total Pages | : 34 |
Release | : 2001 |
Genre | : Credit |
ISBN | : |
Download Trade credit, financial intermediary development, and industry growth Book in PDF, ePub and Kindle
Where do firms turn for financing in countries with poorly developed financial markets? One source is trade credit. And where formal financial intermediaries are deficient, industries that rely more on this source of financing grow faster.
Author | : Inessa Love |
Publisher | : World Bank Publications |
Total Pages | : 34 |
Release | : 2005 |
Genre | : Bank loans |
ISBN | : |
Download Trade Credit and Bank Credit Book in PDF, ePub and Kindle
"The authors study the effect of financial crises on trade credit in a sample of 890 firms in six emerging economies. They find that although provision of trade credit increases right after the crisis, it consequently collapses in the following months and years. The authors observe that firms with weaker financial position (for example, high pre-crisis level of short-term debt and low cash stocks and cash flows) are more likely to reduce trade credit provided to their customers. This suggests that the decline in aggregate credit provision is driven by the reduction in the supply of trade credit, which follows the bank credit crunch. The results are consistent with the "redistribution view" of trade credit provision, in which bank credit is redistributed by way of trade credit by the firms with stronger financial position to the firms with weaker financial stand "--World Bank web site.
Author | : David Dranove |
Publisher | : John Wiley & Sons |
Total Pages | : 544 |
Release | : 2017-07-17 |
Genre | : Business & Economics |
ISBN | : 1119042313 |
Download Economics of Strategy Book in PDF, ePub and Kindle
This text is an unbound, three hole punched version. Access to WileyPLUS sold separately. Economics of Strategy, Binder Ready Version focuses on the key economic concepts students must master in order to develop a sound business strategy. Ideal for undergraduate managerial economics and business strategy courses, Economics of Strategy offers a careful yet accessible translation of advanced economic concepts to practical problems facing business managers. Armed with general principles, today's students--tomorrows future managers--will be prepared to adjust their firms business strategies to the demands of the ever-changing environment.
Author | : Jianer Zhou |
Publisher | : |
Total Pages | : 0 |
Release | : 2012 |
Genre | : |
ISBN | : |
Download The Provision and Impact of Trade Credit in Imbalanced Supply Chain Book in PDF, ePub and Kindle
Trade credit plays an important role in facilitating trades in supply chains. Using large datasets that link U.S. suppliers with their major customers, we show trade credit to be a collaborative and competitive tool from the view of financing collaboration, relationship lending, and horizontal and vertical competition. In particular, we find that while suppliers with smaller market share extend more trade credit to be competitive, suppliers with weaker bargaining power relative to their major customers reduce trade credit to mitigate financing risk. We further investigate trade credit impacts at both the industry and firm levels. When firms use trade credit at their industry-average level (as a collaborative tool), their sales increase with the industry trade credit level; conversely, when they are more aggressive in their trade credit strategy (as a competitive tool), they could carry excessive inventories and manipulate price to improve their gross margins, but a rising price could limit their sales growth. These results raise a serious concern for the effectiveness of overextending trade credit in supply chains.
Author | : Lynn Otto Michaelis |
Publisher | : |
Total Pages | : 266 |
Release | : 1975 |
Genre | : Credit |
ISBN | : |
Download Trade Credit, Firm Size, and Market Power in Relation to Monetary and Industrial Organization Theory Book in PDF, ePub and Kindle