IDEAS home Printed from https://ideas.repec.org/a/vrs/ecocul/v14y2017i1p5-20n1.html
   My bibliography  Save this article

The Evaluation of Trade Credit Insurance in Lithuanian Business Market as a Credit Risk Management Tool

Author

Listed:
  • Lezgovko Aleksandra

    (Mykolas Romeris University, Insurance and risk management institute, Vilnius, Lithuania)

  • Jakovlev Andrej

    (Mykolas Romeris University, Vilnius, Lithuania)

Abstract

In today’s trade, the vast majority of commercial transactions in both domestic and international trade are concluded by applying trade credit terms. The aim of this article is to analyse the trade credit insurance and, according to the methodology, to evaluate it as a credit risk management tool in the context of Lithuanian business market. The authors have proposed a methodology that combines theoretical and practical research methods. First of all, with assistance of qualitative analysis, the alternative external credit risk management tools were examined. Such analysis allows not only to identify the advantages, disadvantages and benefits of researched risk management tools but also to assess the efficiency and rationality of trade credit insurance in the context of alternative methods. In order to carry out an assessment in the practical aspect, considering the lack of statistical data, it was decided additionally to perform an expert evaluation. After performing an assessment of trade credit insurance, it was concluded that in international trade, with a large buyer portfolio and high sales volume, the trade credit insurance becomes the most effective and rational way to manage credit risk, which eliminates the losses because of the debtor’s insolvency or bankruptcy, manages countries and sector’s risks and helps to discipline the debtor, what determines the decline in overdue accounts frequencies, amounts and volumes.

Suggested Citation

  • Lezgovko Aleksandra & Jakovlev Andrej, 2017. "The Evaluation of Trade Credit Insurance in Lithuanian Business Market as a Credit Risk Management Tool," Economics and Culture, Sciendo, vol. 14(1), pages 5-20, June.
  • Handle: RePEc:vrs:ecocul:v:14:y:2017:i:1:p:5-20:n:1
    DOI: 10.1515/jec-2017-0001
    as

    Download full text from publisher

    File URL: https://doi.org/10.1515/jec-2017-0001
    Download Restriction: no

    File URL: https://libkey.io/10.1515/jec-2017-0001?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Ferrando, Annalisa & Mulier, Klaas, 2013. "Do firms use the trade credit channel to manage growth?," Journal of Banking & Finance, Elsevier, vol. 37(8), pages 3035-3046.
    2. Nilsen, Jeffrey H, 2002. "Trade Credit and the Bank Lending Channel," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 34(1), pages 226-253, February.
    3. Richard Pike & Nam Sang Cheng, 2001. "Credit Management: An Examination of Policy Choices, Practices and Late Payment in UK Companies," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 28(7&8), pages 1013-1042.
    4. Richard Pike & Nam Sang Cheng, 2001. "Credit Management: An Examination of Policy Choices, Practices and Late Payment in UK Companies," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 28(7‐8), pages 1013-1042, September.
    5. Peter M. Jones, 2010. "Trade Credit Insurance," World Bank Publications - Reports 27726, The World Bank Group.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Isaac Kwame Essien Obeng, 2016. "Delaying payments after the financial crisis: evidence from EU companies," MENDELU Working Papers in Business and Economics 2016-66, Mendel University in Brno, Faculty of Business and Economics.
    2. Cristina Martínez-Sola & Pedro J. García-Teruel & Pedro Martínez-Solano, 2013. "Trade credit policy and firm value," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 53(3), pages 791-808, September.
    3. Wang, Kai & Zhao, Ruiqing & Peng, Jin, 2018. "Trade credit contracting under asymmetric credit default risk: Screening, checking or insurance," European Journal of Operational Research, Elsevier, vol. 266(2), pages 554-568.
    4. Cristina Martínez Sola & Pedro J. García-Teruel & Pedro Martínez Solano, 2012. "Trade credit policy and firm value," Working Papers. Serie EC 2012-01, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    5. Masahiro Enomoto, 2018. "Effects of Corporate Governance on the Relationship between Accounting Quality and Trade Credit: Evidence from Japan," Discussion Paper Series DP2018-12, Research Institute for Economics & Business Administration, Kobe University, revised Dec 2023.
    6. Pedro J. García-Teruel & Pedro Martínez-Solano & Juan P. Sánchez-Ballesta, 2014. "Supplier Financing and Earnings Quality," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 41(9-10), pages 1193-1211, November.
    7. Zhou, Zhongsheng & Li, Zhuo, 2023. "Corporate digital transformation and trade credit financing," Journal of Business Research, Elsevier, vol. 160(C).
    8. Alpa Dhanani, 2005. "Corporate Dividend Policy: The Views of British Financial Managers," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 32(7‐8), pages 1625-1672, September.
    9. Rasa Kanapickiene & Renatas Spicas, 2019. "Credit Risk Assessment Model for Small and Micro-Enterprises: The Case of Lithuania," Risks, MDPI, vol. 7(2), pages 1-23, June.
    10. Godfred Adjapong Afrifa & Ahmad Alshehabi & Ishmael Tingbani & Hussein Halabi, 2021. "Abnormal inventory and performance in manufacturing companies: evidence from the trade credit channel," Review of Quantitative Finance and Accounting, Springer, vol. 56(2), pages 581-617, February.
    11. Liu, Guangqiang & Wang, Shenghua, 2023. "Digital transformation and trade credit provision: Evidence from China," Research in International Business and Finance, Elsevier, vol. 64(C).
    12. James, Hui Liang & Ngo, Thanh & Wang, Hongxia, 2023. "The impact of more able managers on corporate trade credit," Journal of Behavioral and Experimental Finance, Elsevier, vol. 40(C).
    13. Tarkom, Augustine & Yang, Lukai, 2024. "Presidential economic approval rating and trade credit," International Review of Financial Analysis, Elsevier, vol. 93(C).
    14. Paul, Salima & Boden, Rebecca, 2008. "The secret life of UK trade credit supply: Setting a new research agenda," The British Accounting Review, Elsevier, vol. 40(3), pages 272-281.
    15. Padachi Kesseven D & Carole Howorth, 2014. "Focus on working capital management practices among Mauritian SMEs: Survey evidence and empirical analysis," E3 Journal of Business Management and Economics., E3 Journals, vol. 5(4), pages 097-108.
    16. Belinda L. Del Gaudio & Gabriele Sampagnaro & Claudio Porzio & Vincenzo Verdoliva, 2022. "The signaling role of trade credit in bank lending decisions: Evidence from small and medium‐sized enterprises," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 49(1-2), pages 327-354, January.
    17. Casey, Eddie & O'Toole, Conor M., 2014. "Bank lending constraints, trade credit and alternative financing during the financial crisis: Evidence from European SMEs," Journal of Corporate Finance, Elsevier, vol. 27(C), pages 173-193.
    18. Maes, Elisabeth & Dewaelheyns, Nico & Fuss, Catherine & Van Hulle, Cynthia, 2019. "The impact of exporting on financial debt choices of SMEs," Journal of Business Research, Elsevier, vol. 102(C), pages 56-73.
    19. Lars Norden & Stefan van Kampen, 2015. "The Dynamics of Trade Credit and Bank Debt in SME Finance: International Evidence," RBA Annual Conference Volume (Discontinued), in: Angus Moore & John Simon (ed.),Small Business Conditions and Finance, Reserve Bank of Australia.
    20. Maria Cristina Arcuri & Raoul Pisani, 2021. "Is Trade Credit a Sustainable Resource for Medium-Sized Italian Green Companies?," Sustainability, MDPI, vol. 13(5), pages 1-19, March.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:vrs:ecocul:v:14:y:2017:i:1:p:5-20:n:1. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Peter Golla (email available below). General contact details of provider: https://www.sciendo.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.