Template-Type: ReDIF-Paper 1.0
Author-Name: Stefania Cosci 
Author-X-Name-First: Stefania 
Author-X-Name-Last: Cosci
Author-Email: s.cosci@lumsa.it
Author-Workplace-Name: LUMSA University 
Author-Name: Roberto Guida 
Author-X-Name-First: Roberto
Author-X-Name-Last: Guida
Author-Email: r.guida@unint.eu
Author-Workplace-Name: UNINT University of Rome
Author-Name: Valentina Meliciani 
Author-X-Name-First: Valentina  
Author-X-Name-Last: Meliciani
Author-Email: vmeliciani@luiss.it
Author-Workplace-Name: LUISS University 
Title: Does Trade Credit Really Help Relieving Financial Constraints? An analysis on a sample of Italian firms

Abstract: The European Union introduced a Directive aimed at reducing the use of trade credit because it is supposed to affect negatively the European economy. This contrasts with the “redistribution view” arguing that trade credit may allow the financing of credit constrained firms by their more liquid suppliers. Previous empirical analyses found some support for this view but they did not distinguish between net borrowers and net lenders. We show that in Italy the probability to be a net borrower is higher for those firms that are not likely to be credit constrained and that have more market power. Consistently with this result, the substitutability between trade debt and bank short-term debt occurs only for net lenders. These findings cast some doubts on the positive role of trade credit in relieving financial constraints and suggest that regulating late payments can protect vulnerable suppliers from more powerful buyers.
Length: 26 pages
Creation-Date: 2017-08
Publication-Status: 
File-URL: https://repec.lumsa.it/wp/wpC20.pdf
File-Format: Application/pdf
Number: wpC20
Classification-JEL: 
Keywords: Banks, Trade Credit
Handle: RePEc:lsa:wpaper:wpC20