When do trade credit discounts matter? Evidence from Italian firm-level data

By G. Marotta. 2005

141 citations recorded by the source corpus.

Italian firms are top users of trade credit in an international comparison. The paper offers some clues to the determinants of this stylized fact exploiting the answers of about 1900 manufacturing firms on a wide range of contractual features, separately for domestic and foreign customers. The main finding of the univariate analysis is that, with the almost totality of transactions made on credit, there is no evidence that this way of financing is more expensive than loans. An econometric investigation shows that discounts offered have the expected effect of reducing payment delays mostly for customers located abroad, where customary credit periods are shorter and creditors’ rights protection is more effective. The result is consistent with the poor explanatory power of discounts received in regressions for the trade debt period of domestic firms.

Subfields: Accounting, Mechanical Engineering

View Paper: https://www.semanticscholar.org/paper/2accfe8efe3d095b3e3bcf2ea67982301d09ebb1

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Citations in the corpus

Do Firms Use the Trade Credit Channel to Manage Growth? (2013, unknown): “As explained by Marotta (2005), the initial terms of payment are usually longer for instance in Italy, Spain and Portugal with respect to Nordic countries, the availability of discounts is more limited and often there are no penalties for late payments in the former group of countries.”
Trade Credit, Relationship-specific Investment, and Product Market Power (2015, unknown): “However, in the context of Italian firms, Marotta (2005) finds that TC levels are the same for credit-constrained and unconstrained firms.”
Trade Credit, Bank Credit, and Flight to Quality: Evidence from French SMEs (2015, background): “Contractual features such as timing of payments, discounts for early settlements, methods of payment, and (if applicable) interest or penalties for late payment vary according to financial, institutional, and legal systems (Marotta 2005; Ziane 2008).”
Financing patterns of European SMEs – an empirical taxonomy (2016, unknown): “This result can be explained by the generally longer payment periods in these countries (EPI 2014; Garcia-Teruel and Martinez-Solano 2010; Marotta 2005; Psillaki and Eleftheriou 2014).”
Bargaining power and trade credit (2016, background): “Moreover, there is evidence that small credit constrained firms do offer trade credit (e.g., McMillan and Woodruff, 1999 and Marotta, 2005), but it is not clear why they would do that.”
Determinants of trade credit: A comparative study of European SMEs (2010, background): “…in European small and medium-sized firms, and second, since there are important differences in trade credit levels between countries (Demirgüc-Kunt and Maksimovic, 2002; Marotta, 2005), to analyse whether the factors that determine the level of trade credit differ among the European countries.”