The role of institutions in supporting SME financing through the trade credit channel: an empirical analysis of Italian provinces

Fabrizio Coricelli (), Marco Frigerio and Pietro Vozzella
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Fabrizio Coricelli: PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - ENPC - École nationale des ponts et chaussées - IP Paris - Institut Polytechnique de Paris, UNISI - Università degli Studi di Siena = University of Siena, CEPR - Center for Economic Policy Research
Marco Frigerio: UNISI - Università degli Studi di Siena = University of Siena
Pietro Vozzella: UNIVPM - Polytechnic University of Marche / Università Politecnica delle Marche

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Abstract: Trade credit is a relevant channel through which institutional development affects the real economy. When contract enforcement is weak and trust is low, firms engage in opportunistic behavior that is likely to disproportionally penalize small firms, characterized by weak bargaining power with respect to their larger customers or suppliers. This mechanism is particularly relevant during periods of sharp tightening of credit conditions from banks. Exploiting regional variation in Italy, the paper finds that institutional development mitigated the impact of the financial crisis, particularly for smaller firms, by limiting the adverse effects of the trade credit channel on their liquidity conditions.

Date: 2025-02
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Published in Small Business Economics, 2025, 65 (2), pp.947-972. ⟨10.1007/s11187-025-01013-6⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:pseptp:halshs-05838882

DOI: 10.1007/s11187-025-01013-6

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