XXV Edition

1-2 December 2016"

Trade Credit in Times of Crisis: Evidence from European Smes

Bussoli Candida, LUM Jean Monnet University
Marino Francesca, University of Bari Aldo Moro

The paper investigates the use of trade credit in a sample of small and medium enterprises in Europe, before and after the outbreak of the subprime financial crisis and the sovereign debt crisis (2006-2013). It aims to verify if trade credit may be a source of funding alternative to other sources of funding. It also aims to verify if firms that grant extended payment terms to their customers tend to demand delayed accounts payable from their suppliers. Results suggest that SMEs with a high probability of insolvency - than less access to financial markets - and with high levels of days of sales outstanding tend to use more trade credit. These relations are reduced during the financial crises. Our evidence suggests that liquidity shocks may be propagated trough trade credit channel in the case of small and high risk firms.

Area: Microfinance and Economic Development

Keywords: trade credit, SMEs, crisis

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