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Trade Credit Contracts

Leora Klapper (), Luc Laeven () and Raghuram Rajan

No 17146, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We employ a novel dataset on almost 30,000 trade credit contracts to describe the broad characteristics of the parties that contract together, the key contractual terms such as the discount for early payment and the days by when payment is due. Whereas prior work has typically used information on only one side of the buyer-seller transaction, this paper utilizes information on both. We find that the largest and most creditworthy buyers receive contracts with the longest maturities from smaller suppliers, with the latter extending credit to the former perhaps as a way of certifying product quality. Discounts for early payment seem to be offered to riskier buyers to limit the potential nonpayment risk when credit is extended for these non-financial reasons.

JEL-codes: G32 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban and nep-int
Date: 2011-06
Note: CF
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Published as Leora Klapper & Luc Laeven & Raghuram Rajan, 2012. "Trade Credit Contracts," Review of Financial Studies, Society for Financial Studies, vol. 25(3), pages 838-867.

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Related works:
Journal Article: Trade Credit Contracts (2012) Downloads
Working Paper: Trade credit contracts (2011) Downloads
Working Paper: Trade credit contracts (2010) Downloads
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