Is Trade Credit a Sustainable Resource for Medium-Sized Italian Green Companies?

Maria Cristina Arcuri and Raoul Pisani
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Maria Cristina Arcuri: Department of Economics and Management, University of Florence, 50121 Florence, Italy
Raoul Pisani: Department of Economics and Management, University of Trento, 38122 Trento, Italy

Sustainability, 2021, vol. 13, issue 5, 1-19

Abstract: Medium-sized Enterprises (MEs) are a limited number of Small and Medium-sized Enterprises (SMEs) in EU-28 countries, but they contribute greatly to value added and employment. They are also key to pursuing sustainable local development in terms of green economic growth. Because trade credit is a crucial financial source for SMEs, this article investigates the importance of trade credit for Italian MEs, and particularly for ‘green’ MEs, rather than ‘non-green’ MEs. A panel analysis is applied to 101,250 observations over the period 2010–2019. We find that green MEs rely more on trade credit than non-green MEs. Moreover, trade credit is more important for younger, smaller, less profitable, and less liquid MEs. We further show that a substitution effect between trade and banking credit exists, and that the local development level affects the demand for trade credit. Our results demonstrate that trade credit supports sustainable development more than banking credit. Financial intermediaries should therefore include green parameters in the assessment of the creditworthiness of MEs, and policymakers should consider that trade credit and financial inclusion may be important in pursuing sustainable local development and economic growth.

Keywords: account payable and receivable; green economy; firm age; industry in the strict sense; local development; medium enterprise (ME); trade credit (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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