An Investigation into the Determinants of Trade Credit Use by French Small and Medium Enterprises

Ydriss Ziane ()
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Ydriss Ziane: MDEM - Modélisation de la dynamique économique et monetaire - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique

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Abstract: The aim of this paper is to analyse the role of trade credit in the financing of French small and medium-sized enterprises (SMEs) using specific data collected in a recent survey on small firms. We provide direct evidence that inter-firm credit offered by SMEs is sensitive to the strategic importance of firm size and position. Using existing theories, we also test a supply function and a model of demand for trade credit. On the one hand, results validate supply-side theories relative to a reduction of asymmetric information between the buyer and the seller. On the other hand, econometric exercises show that both a transaction motive, linked to efficient cash management, and a financing motive are significant determinant of trade credit demand. According the financing motive, trade credit is specifically used for the purpose of short-term financing by firms exposed to information asymmetries and bank credit rationing.

Keywords: France; Trade credit; Small and medium-sized enterprises; Credit rationing; Asymmetric information (search for similar items in EconPapers)
Date: 2006-01
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Published in The Euro-Mediterranean Economics and Finance Review, 2006, pp.42-50

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-00278726

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