Trade Credit as Collateral

A remarkable feature of short-term business finance is the widespread use of trade credit as collateral in bank borrowing, especially by small and medium-sized firms. The paper models the incentives for a firm to collateralize accounts receivable as a trade-off between the benefit from lower interest rates and the implicit cost from the disclosure of private information associated with this form of collateral. The model shows that the share of receivables pledged as collateral is larger: i) when the borrowing firm is riskier (and the difference in interest rates between secured and unsecured lending is larger); ii) when information disclosure costs for the firm are lower (e.g., when the information is dispersed among many banks and firmÂ’s assets are mostly made up of tangibles); iii) when the default correlation between sellers and buyers is lower; iv) when the legal protection of creditors is weaker (and suppliers have a stronger advantage over banks in monitoring and enforcing loan contracts). These predictions are supported by empirical evidence in a sample of 7,250 Italian firms.trade credit, collateral, information disclosure

Il credito commerciale: problemi e teorie

This paper presents a survey of the literature on the determinants of inter-firm credit and on its implications for the transmission mechanism of monetary policy. Theoretical explanations for trade credit can be divided in two categories: a) theories based on real functions performed by trade credit; b) theories based on transaction and financial motivations. The former category includes theories that interpret the supply of trade credit as a tool to achieve a variety of marketing objectives (to build customer relationships, as a guarantee for product quality, as a mechanism for price discrimination, as a response to demand variability). The latter category includes theories that consider trade credit as a tool to reduce transaction costs (as a substitute for money) or as a financial alternative to bank credit or to other forms of financing. The paper also examines the macroeconomic implications of these theories, with special reference to the relations between trade credit and monetary policy. Conclusions set forward some hypotheses for research, by looking at preliminary evidence on European countries, which are characterised by strong differences in the length of payment terms that led to the adoption of an EC Directive on combating late payment in commercial transactions.credito commerciale, dilazioni di pagamento, politica monetaria

Economic developments in the Italian regions in 2006

The Economy of the Italian Regions in the year 2006 analyzes the evolution of production, labour market, financial aggregates and regional public finances in the four main Italian territorial areas. Topics analyzed focus on structural change in the Italian economy; trends in Mezzogiorno's exports; the evolution of local markets for university-level education after the introduction of a three-year degree; and the composition of households' financial assets and liabilities. Also examined are regional regulation in the commerce sector and the management of local public transportation. Two final points of focus relate to local public finances: the degree of regional taxation flexibility, and the main peculiarities of the five special statute regions.Italian Regions, Economic Developments

Condizioni del credito commerciale e differenziazione della clientela

In this paper we examine trade credit terms in Italy on the basis of two original surveys carried out by the Bank of Italy. The surveys show that 80-90 per cents of sales are paid on a deferred payment basis of 90 days on average and a delay of 11 days. 83 per cent of trade credit is extended on net terms (with no discount offered for prompt payment). When two-part terms are offered, the cost of trade credit is normally very high and well above market interest rates. These results point to the importance of marketing determinants for the extension of trade credit (product quality guarantee, customer relationships) more than financial motives. Most of suppliers (80 per cent) differentiate customers by means of price and payment terms in favor of older and bigger firms and longstanding customers; they apply stricter terms to late payers, while being indulgent with those in temporary distress. Regressions on a sample of bilateral transactions suggest that cash payments are required when information asymmetry is relatively low and the risk of customer default relatively high. Two-part terms, on the other hand, are offered to not well-known customers and are aimed at extracting information on their creditworthiness. More generally, the analysis shows that two-part and net terms respond to very different aims. Contrary to the presumption of most of the literature, generalizing the characteristics of two-part terms contract as pertaining to the whole of credit transactions is unwarranted. Price and payment terms are a flexible and many-faceted device extensively used by firms for building customer relationships, acquiring information on buyers creditworthiness, and exploiting market power.trade credit

Il credito commerciale: problemi e teorie

Consiglio Nazionale delle Ricerche - Biblioteca Centrale - P.le Aldo Moro, 7, Rome / CNR - Consiglio Nazionale delle RichercheSIGLEITItal

Classical Liberalism, Non-interventionism and the Origins of European Integration: Luigi Einaudi, Friedrich A. von Hayek, Wilhelm Röpke

What did classical liberal thinkers contribute to the theoretical underpinnings of the European unification project? This paper examines works by Luigi Einaudi, Friedrich A. von Hayek and Wilhelm Röpke, attempting to understand to what extent the nineteenth-century pacifist tradition of classical liberalism came back to life in works of these authors. Their views on the international order show a certain degree of homogeneity—but up to a point. While Einaudi and Hayek were distinctively more favourable to the European project, Röpke had a less favourable view of European unificaton, fearing it may result in increasing centralisation. They, nonetheless, shared some common elements in understanding international order that we trace back to nineteenth-century liberalism.2reservedmixedMasala, Antonio; Mingardi, AlbertoMasala, Antonio; Mingardi, Albert