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An Investigation into the Determinants of Trade Credit Use by French Small and Medium Enterprises

Author

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  • Ydriss Ziane

    (MDEM - Modélisation de la dynamique économique et monetaire - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique)

Abstract

The aim of this paper is to analyse the role of trade credit in the financing of French small and medium-sized enterprises (SMEs) using specific data collected in a recent survey on small firms. We provide direct evidence that inter-firm credit offered by SMEs is sensitive to the strategic importance of firm size and position. Using existing theories, we also test a supply function and a model of demand for trade credit. On the one hand, results validate supply-side theories relative to a reduction of asymmetric information between the buyer and the seller. On the other hand, econometric exercises show that both a transaction motive, linked to efficient cash management, and a financing motive are significant determinant of trade credit demand. According the financing motive, trade credit is specifically used for the purpose of short-term financing by firms exposed to information asymmetries and bank credit rationing.

Suggested Citation

  • Ydriss Ziane, 2006. "An Investigation into the Determinants of Trade Credit Use by French Small and Medium Enterprises," Post-Print hal-00278726, HAL.
    • Handle: RePEc:hal:journl:hal-00278726
    as

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