Too many to fail? Inter-enterprise arrears in transition economies

Antje Hildebrandt
Additional contact information
Antje Hildebrandt: Humboldt University

Development and Comp Systems from University Library of Munich, Germany

Abstract: In advanced market economies, the use of trade credits is an important way of short-term financing and generally considered as being part of normal business practice. Some transition economies, however, have experienced a rapid accumulation of trade credits which have led to interlocking webs of arrears and collective bailouts by the government. In this paper, firm-level data is used to test whether trade credits are just part of normal business practice comparable to more advanced market-economies or whether trade credits represent a systematic phenomena supporting soft budget constraints of firms in transition. The results suggest that trade credits are not just normal business practice but that they can have negative spill-over effects on other firms by worsening their financial situation. We conclude that the problem of interlocking effects is more pronounced in countries with less developed institutions, low financial intermediation and, overall, no credible commitment to market economic reforms.

Keywords: inter-enterprise arrears; soft budget constraints; transition economies (search for similar items in EconPapers)
JEL-codes: L10 P31 P35 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2002-12-13
New Economics Papers: this item is included in nep-rmg and nep-tra
Note: Type of Document - pdf; prepared on IBM PC; pages: 35; figures: included
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://econwpa.ub.uni-muenchen.de/econ-wp/dev/papers/0212/0212001.pdf (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: https://EconPapers.repec.org/RePEc:wpa:wuwpdc:0212001

Access Statistics for this paper

More papers in Development and Comp Systems from University Library of Munich, Germany
Bibliographic data for series maintained by EconWPA ( this e-mail address is bad, please contact ).