Trade Credit and Bank Finance – Evidence from the Visegrad Group

Ashiqur Rahman · Martin Čepel

38 citations0/0 files storedJournal of Competitiveness

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Working Capital and Financial Performance Banking stability, regulation, efficiency Corporate Finance and Governance

Abstract

This paper examines whether bank finance is a substitute or complementary to trade credit for small and medium-sized enterprises (SMEs) in the region of the Visegrad Group -the Czech Republic, Poland, Hungary, and the Slovak Republic.This paper uses the data set provided by the Business Environment and Enterprise Performance Survey that was conducted by the European Bank for Reconstruction and Development and the World Bank during the period from 2012 to 2014.Using a sample of 1,140 firms, it was discovered that firms having an overdraft facility from banks use more trade credit, and this supports the complementary theory of bank credit and trade credit.Moreover, the results suggest that companies that are younger, innovative, risky, with a concentrated ownership structure and operated by an experienced manager use more trade credit to purchase their material inputs and services.However, the results also show that service-oriented firms use less trade credit than manufacturing firms.

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References

2006Small and medium-size enterprises: Access to finance as a growth constraint 2002Small Business Credit Availability and Relationship Lending: The Importance of Bank Organisational Structure 2008Financing patterns around the world: Are small firms different?☆2003The financing of business start-ups 2007Small and Medium Enterprises Across the Globe 2006Trade Credit: Suppliers as Debt Collectors and Insurance Providers 2008What You Sell Is What You Lend? Explaining Trade Credit Contracts 2011Firm Innovation in Emerging Markets: The Role of Finance, Governance, and Competition

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2020Alter Ego Only Four Times? The Case Study of Business Profits in the Visegrad Group 2020Debt as a financial risk factor in SMEs in the Czech Republic 2019Explaining business failure through determinist and voluntarist perspectives

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