Economics at your fingertips  

Government late payments and firms survival. Evidence from the EU

Maurizio Conti (), Leandro Elia (), Antonella Ferrara () and Massimiliano Ferraresi ()
Additional contact information
Massimiliano Ferraresi: European Commission Joint Research Centre

Working papers from Società Italiana di Economia Pubblica

Abstract: Outstanding payments in commercial transactions, if delayed beyond the agreed period of time, can engender a range of negative externalities, exposing firms to severe liquidity risks. In this study we examine to what extent stricter regulations facing payment backlogs, brought about by the EU directive on Late Payment have affected firms performance. We focus on government-to-business activities and on the firms’ response to the introduction of these regulations. Our evidence suggests that, as a result of the directive, the firms’ exit rate has fallen relatively more in those sectors that sell a larger fraction of their output to the government. We document more pronounced effects in sectors with a large share of small firms and for countries characterized by longer payment delays. Further results show that the adoption of the directive has been associated with an increase in employment in those sectors more connected with the government. Taken together, our findings indicate that more discipline in government’s payment terms can have considerable effects on economic activity

Keywords: Late payment directive; firms' survival; government dependence; payment delays (search for similar items in EconPapers)
JEL-codes: H83 L50 (search for similar items in EconPapers)
Date: 2020-05
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link) Full text (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this paper

More papers in Working papers from Società Italiana di Economia Pubblica Società Italiana di Economia Pubblica Corso Strada Nuova 65 27100 Pavia Italia.
Bibliographic data for series maintained by Simona Scabrosetti ().

Page updated 2021-10-19
Handle: RePEc:ipu:wpaper:87