Impact of the 2008 financial crisis on corporate trade finance

Herbert Broens ()
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Herbert Broens: University of Pécs, Faculty of Business and Economics, Pécs, Hungary

Society and Economy, 2014, vol. 36, issue 4, 511-528

Abstract: Trade finance plays a significant role in the global trade of merchandise, which witnessed a sharp fall in late 2008 and early 2009. Firms across the world experienced restricted access to bank credit in the wake of the financial crisis, and this had a considerable impact on the operation and growth of their businesses. The financial crisis led to a contagion on trade finance and product sellers’ payment terms. Furthermore, corporate trade credit is a potential alternative to institutional financing that serves as an important source of finance. Corporate trade finance represents an important part of short-term financing for firms, especially during financial crises. This paper evaluates the impact of the increased use of corporate trade finance in two unique portfolios of production firms during the financial crisis. All have an active treasury organization. The analysis demonstrates the impact of the financial crisis on corporate trade credit demographically. Furthermore, it uses financial performance and working capital data of other German stock-listed production firms. It analyses how developments or changes in working capital impact a firm’s sales growth, EBIT interest, tangible net and EBITDA margin, and total asset worth.

Keywords: trade credit; trade finance; credit scoring; working capital (search for similar items in EconPapers)
JEL-codes: F14 G32 (search for similar items in EconPapers)
Date: 2014
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