Empirical evidence of trade credit uses of Brazilian publiclylisted companies.docx

Empirical evidence of trade credit uses of Brazilian publiclylisted companies.docx

《Empirical evidence of trade credit uses of Brazilian publiclylisted companies.docx》由会员分享，可在线阅读，更多相关《Empirical evidence of trade credit uses of Brazilian publiclylisted companies.docx（13页珍藏版）》请在冰豆网上搜索。

EmpiricalevidenceoftradecreditusesofBrazilianpubliclylistedcompanies

BAR.BrazilianAdministrationReview

version ISSN1807-7692

BAR,Braz.Adm.Rev. vol.7 no.3 Curitiba July/Sept. 2010

doi:

10.1590/S1807-76922010000300003 

EmpiricalevidenceoftradecreditusesofBrazilianpublicly-listedcompanies

RichardSaito*I;MárciaLimaBandeiraII

IEscoladeAdministraçãodeEmpresasdeSãoPaulo/FundaçãoGetulioVargasSãoPaulo,SP,Brazil,E-mailaddress:

rsaito@fgvsp.br

IIEscoladeAdministraçãodeEmpresasdeSãoPaulo/FundaçãoGetulioVargasSãoPaulo,SP,Brazil,E-mailaddress:

marciabandeira@gvmail.br

Abstract

Whiletradecreditmaybeusedasasubstituteforbankloans,wefindempiricalevidencethatlistedfirmsdousebankdebtandtradecreditastwocomplementarysourcesoffinancinginlinewithrecenttheoreticalpapers（e.g.Biais&Gollier,1997）andevidencefoundinotherempiricalworks（e.g.Alphonse,Ducret,&Séverin,2006）.Byusingasampleof263publicly-listedcompaniesfrom2006,ourfindingsempiricallysupportthattradecreditmaybeusedas（i）asignofthefirm’squality,and（ii）awayoffacilitatingaccesstobankdebtastradecreditseemstobeasubstituteforbankdebt.

Keywords:

tradecredit;public-listedcompanies;sourcesoffinancing;debt.

Introduction 

Tradecreditiscreditextendedbysupplierstobuyers,particularlyduringsalesnegotiations.Schwartz（1974）reportsthattradecreditisacomplementtobankdebtandcapitalmarketdebt.Itdiminishestheefficiencyofanaggregatemonetarycontrol,butontheotherhanditmitigatesdiscriminatoryeffectscausedbyarestrictivemonetarypolicy,whichtendstoaffectmainlysmallandmediumsizedenterprises[SME].Becauseofthiscreditconstraint,tradecreditisviewedasafinancialsourceofgreaterimportanceincountrieswherefinancialinstitutionsandcapitalmarketsarenotfullydeveloped.Itdoesnotmean,however,thatcreditextension（ortradecredit）isnotrelevantincountrieswithwell-developedfinancialinstitutionssuchastheUSorGermany.TradecreditisalsoviewedasanimportantsourceoffinancingforSME,sincethesefirmsnormallyhavelessaccesstosourcesoffinancing（andarealsomoreaffectedbyrestrictivemonetarypolicies）.However,tradecreditismuchusedbylargefirms.Inoursample,forexample,tradecredituserepresentsaround8%oftotaldebt,or1/3offirms’financing（excludingcorporatedebt）.

DespitetherelevanceoftradecredittoBrazilianfirms,thereisnoliteratureaboutthissourceoffinancingusingBraziliandata.Thisstudyaimstofillthisgap.AnotherinnovationintroducedbythepresentstudyisthefocusonBrazilian-listedfirms.Itisreasonabletoexpect,therefore,thattheyhaveatleastthesameaccesstobankloansasprivatefirms.Inaddition,publiclistedfirmshaveaccesstopublicdebtwhileprivatefirmsdonot.Nevertheless,thecomplexproceduresforaccessingtheseothersourcesoffinancing,theproportionallylargerfinancingneedsofpublicfirmsandtheirneedtodiversifytheirfinancingsuggestthattradecreditmaybejustas（oralmostas）usefulforpublic,largefirmsasitisforsmallerones.

ThisstudyinvestigatestradecreditfromtheviewpointofbothsupplierandbuyerbasedonasampleofBrazilianpublicfirms’data.WetestthehypothesisofAlphonse,DucretandSéverin（2006）whoarguethatcreditrationedfirmswouldusetradecreditascomplementaryandalternativesourceoffinancing,whilefirmsnotfacingcreditrationingwoulduseitonlyasanalternativesource.Theanalysisoftradecreditsupply（thesupplierviewpoint）focusesonfirms’accesstocredit.

Theremainderofthispaperisorganizedasfollows.TheliteraturereviewandhypothesesarepresentedinSecondSection,datadescriptioninThirdSectionandtheempiricalresultsandthediscussionofresultsinFourthSection4.FifthSectionconcludes.

LiteratureReview

Firmsjustifysupplyingtradecreditonthebasisthat,intheabsenceofsuchfinancing,clientswhodonothaveaccesstocreditfromfinancialinstitutionswillnotbuytheirproducts（Nadiri,1969）.Emery（1984）arguesthattradecreditprovisionboostssales,representingastrategytoreducefirms’inventorieswithoutpricecuts.Inthissense,thisstrategywouldavoidcostsassociatedwithpricereductionandpreservethefirms’discretionarypricingability,aspointedoutbyPetersenandRajan（1997）.Aninstrumentthatfacilitatesthispracticeisthetradebill,whichcanbediscountedinadvance.

Anotherrelevantaspectoftradecreditisthatitplaysaroleasaproductguaranteewhenasupplier’sreputationisnotwellknown,sinceclientscanobservethequalityofproductsbeforeeffectivelypayingforthem（Smith,1987;Long,Malitz,&Ravid,1993）.

Wilner（2000）additionallyarguesthat,forasupplierthatreliesonaspecificcustomer,itmaybeinthesupplier’slongtermintereststogranttradecredittothiscustomerevenifthesupplierissufferingtemporaryfinancialdistress.Inthissense,theauthorverifiedthatlargebuyersfacedwithcreditrestraintsmayusetheirposition（asalargecostumer）toobtaintradecreditfromtheirsuppliers.

Althoughthesereasonsjustifytheinterestofnon-financialfirmsinextendingtradecredit,itisstillinterestingtoaskwhytheydosointhepresenceoffinancialfirmsspecializinginsellingcredit.Theanswerisdirectlyrelatedtoriskmitigationbynon-financialfirmsinrelationtobanks.AccordingtoPetersenandRajan（1997）,theexplanationismostlyrelatedtoinformationaladvantagesthatsuppliersexperience,comparedtobanks,duetotheirbusinessrelationshipwiththeirclients（Thesuppliers’visitstotheirclientsmayprovideusefulhintsaboutinventories,employeeredundancy,clients’complaintsandotherproblemsthatthebuyermayeventuallyface）.

First,suppliersmayobtaininformationabouttheircustomersinthenaturalcourseofbusiness,henceinamoretimelyandlesscostlywaythanbanks.AsCook（1997）pointsout,thiscanbeexplainedbythefactthatsuppliersvisittheircustomersonaregularbasis:

insuchvisits,suppliers’representatives（salespeople,commercialmanagers）getintouchwithbuyers’employeesandrepresentativesofotherfirms,obtaininginformationabouttheirrelationshipwiththebuyer.Anotherfacilitatingfactoristhatsuppliersandbuyersfrequentlybelongtorelatedindustries,whichmakesiteasyforthesupplierstohaveagoodassessmentoftheircustomers’marketconditions.Moreover,PetersenandRajan（1997）pointoutthatthefrequencyandvolumeofpurchasesprovidearelevantsignalaboutthecustomer’ssituation.

Thebusinessrelationshipalsoprovidesthesupplierswithamonitoringadvantage.MianandSimth（1992）statethat,facedwithalikelydefault,thesuppliercancutfuturessales.Thisattitudecanbeharmfulandeventriggerthefirm’sshutdown,especiallyiftherearefewalternativesuppliersofthatinput.Ontheotherhand,retaliationfromfinancialinstitutionsdoesnothaveasimmediateaneffectasthesuppliers’actions.Knowingthatsuppliers’retaliationcanleadtotheirshutdown,buyershaveanextraincentivetoavoiddefaultingontradecredit.Furthermore,BuckartandEllingsen（2004）arguethatgoodsaremoredifficulttodivertthancash,thatis,supplierscanovercomemoralhazardeasierthanbanks.

ThelastadvantagementionedbyPetersenandRajan（1997）hastodowiththenatureofcollateralassets.Incaseofdefault,lenderscanseizethebuyers’inventoryofgoods:

however,giventhenatureoftheiractivities,suchassetsarelessvaluabletobanksthantosuppliers（seealsoFrank&Maksimovic,2004andLonghofer&Santos,2003）.Alltheadvantagesofnon-financialfirmsarerelatedtoriskmitigation,sincethesefirmscanreduceinformationalasymmetry.

Finally,itisimportanttoexplainwhyfirmsusetradecreditevenifitisconsideredmorecostlythanotherformsofcredit.Therearetwomainreasonsfortheinterestinitsuse:

（1）tradecreditisanalternativesourceoffinancing,especiallywhenfirmsarecreditconstrainedand

（2）itisviewedasasignofgoodqualityoffirms,makingiteasierforthemtoaccessbankloans.

BurkartandEllingsen’s（2004）modelpredictsthat,inthecaseofwealthyfirms,theuseoftradecredithasanegativerelationshiptowealth.Moreover,accordingtotheseauthors,theleastwealthyfirmsusebankloansandtradecredituptotheirlimit.Cunninghan（2004）empiricallyverifiesBurkartandEllingsen’smodel（2004）.Bydefiningwealthasnetincomebeforetax,shefoundthat,formedium-wealthfirms,asthelimitofbankcreditincreases,tradecreditislessused;andforlow-wealthfirms,theyaredirectlyproportional,whichsuggeststhatthistypeoffirmexhaustsbothlimitsofbankcreditandtradecredit.

PetersenandRajan（1997）foundthatcreditconstrainedfirmsusemoretradecredit,whilefirmswithmoreaccesstocreditfromfinancialinstitutionsextendmorecredittotheircustomers;theseresultswerefurthercorroboratedbyBiaisandGollier（1997）,whoalsosuggestthattradecreditcanmitigateinformationasymmetryproblems.Asexplainedintheprevioussection,suppliershaveadvantagebyobtaininginformationabouttheirbuyersincomparisontobanks,andhenceaccesstotradecreditwouldworkasasignofthefirm’sgoodquality,facilitatingtheiraccesstobankloans.TheresultsofCook（1997）supportthisrationaleforacountrywithlessdevelopedfinancialinstitutions（Russia）.

Alphonseetal.（2006）verifythissignalingroleoftradecredit,usingdatafortheUSandsimultaneousequations（duetotheendogeneityproblembetweenbankd