Bargaining power and trade credit Fabbri, Daniela; Klapper, Leora F.
Journal of corporate finance (Amsterdam, Netherlands),
12/2016, Letnik:
41
Journal Article
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This paper investigates how the supplier's bargaining power affects trade credit supply. We use a novel firm-level database of Chinese firms with unique information on the amount, terms, and payment ...history of trade credit extended to customers and detailed information on product market structure and clients-supplier relationships. We document that suppliers with weak bargaining power towards their customers are more likely to extend trade credit, have a larger share of goods sold on credit, and offer a longer payment period before imposing penalties. Important customers extend the payment period beyond what has been offered by their supplier and generate overdue payments. Furthermore, weak bargaining power suppliers are less likely to offer trade credit when credit-constrained by banks. Our findings suggest that suppliers use trade credit as a competitive device in the product market.
•We investigate the effect of bargaining power on trade credit supply.•We use a comprehensive set of measures for trade credit terms and market power.•Trade credit extension, amounts, payment periods are driven by supplier market power.•Important customers extend agreed payment periods and generate overdue payments.
Factoring is explicitly linked to the value of a supplier’s accounts receivable and receivables are sold, rather than collateralized, and factored receivables are not part of the estate of a bankrupt ...firm. Therefore, factoring may allow a high-risk supplier to transfer its credit risk to higher quality buyers. Empirical tests find that factoring is larger in countries with greater economic development and growth and developed credit information bureaus. “Reverse factoring” may mitigate the problem of borrowers’ informational opacity if only receivables from high-quality buyers are factored. We illustrate the case of the Nafin reverse factoring program in Mexico.
We use recent data on firm-level corporate governance (CG) rankings across 14 emerging markets and find that there is wide variation in firm-level governance in our sample and that the average ...firm-level governance is lower in countries with weaker legal systems. We explore the determinants of firm-level governance and find that governance is correlated with the extent of the asymmetric information and contracting imperfections that firms face. We also find that better corporate governance is highly correlated with better operating performance and market valuation. Finally, we provide evidence that firm-level corporate governance provisions matter more in countries with weak legal environments.
This paper summarizes the first publicly available, user-side data set of indicators that measure how adults in 148 countries save, borrow, make payments, and manage risk. We use the data to ...benchmark financial inclusion—the share of the population that uses formal financial services—in countries around the world, and to investigate the significant country- and individual-level variation in how adults use formal and informal financial systems to manage their day-to-day finances and plan for the future. The data show that 50 percent of adults worldwide are "banked," that is, have an account at a formal financial institution, but also that account penetration varies across countries by level of economic development and across income groups within countries. For the half of all adults around the world who remain unbanked, the paper documents reported barriers to account use, such as cost, distance, and documentation requirements, which may shed light on potential market failures and provide guidance to policymakers in shaping financial inclusion policies.
Financial inclusion--defined as the use of formal accounts--can bring many benefits to individuals. Yet, we know very little about the factors underpinning it. This paper explores the individual and ...country characteristics associated with financial inclusion and the policies that are effective among those most likely to be excluded: poor, rural, female or young individuals. Overall, we find that greater financial inclusion is associated with lower account costs, greater proximity to financial intermediaries, stronger legal rights, and more politically stable environments. However, the effectiveness of policies to promote inclusion varies depending on the characteristics of the individuals considered.
The authors summarize the extant literature on the relationship between gender and entrepreneurship. They note significant quantitative gender differences in business entry, with male-owned firms ...heavily prevailing over firms owned by women in many parts of the world. They find that enterprises owned by men on the one hand and women on the other are generally concentrated in different sectors, women entrepreneurs being better represented in labor intensive sectors such as trade and services rather than capital intensive manufacturing industries. They also observe certain gender differentials in business survival and growth patterns. Yet an analysis of a large body of literature does not suggest that, in general, the so called “gender gap” in entrepreneurship can be explained by explicit discrimination in laws or regulations. Rather, differences in quantitative and qualitative indicators of business entry and performance can in part be explained by a number of business environment factors that disproportionately affect a woman's decision to operate a business in the formal sector. For example the concentration of women in low capital intensive industries—which require less funding and at the same time have a lower potential for growth and development—might also be driven by barriers against women regarding access to finance. Furthermore, women may have relatively less physical and “reputational” collateral than men, which limits their access to finance. Overall the literature suggests that improvements in the business environment can help promote high-growth female entrepreneurship.
The Global Findex database is the world's most comprehensive set of data on how people make payments, save money, borrow and manage risk. Launched in 2011, it includes more than 100 financial ...inclusion indicators in a format allowing users to compare access to financial services among adults worldwide -- including by gender, age and household income. This third edition of the database was compiled in 2017 using nationally representative surveys in more than 140 developing and high-income countries. The database includes updated indicators on access to and use of formal and informal financial services. It features additional data on Fintech and digital financial services, including the use of mobile phones and internet technology to conduct financial transactions. Global Findex data is utilized to track progress toward the World Bank's goal of Universal Financial Access by 2020 and the United Nation's Sustainable Development Goals. The data also is a source for the G20 Financial Inclusion Indicators and a benchmark for policymakers seeking to expand access to and use of financial services. Lastly, this report discusses opportunities to expand access to financial services among the unbanked, and ways to promote greater use of digital financial services among the underbanked.
Panel data for 93 countries shows that most countries experienced a sharp drop in new firm registration during the financial crisis. The decline was more pronounced in countries with higher levels of ...financial development that were more affected by the crisis.
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► Business registration dropped in nearly all countries during the 2008 global financial crisis. ► New firm registrations dropped more sharply in countries more affected by the crisis. ► The crisis had a more negative impact on new business registration in countries with higher levels of financial development.
Bank Competition and Financial Stability Berger, Allen N.; Klapper, Leora F.; Turk-Ariss, Rima
Journal of financial services research,
04/2009, Letnik:
35, Številka:
2
Journal Article
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Under the traditional “competition-fragility” view, more bank competition erodes market power, decreases profit margins, and results in reduced franchise value that encourages bank risk taking. Under ...the alternative “competition-stability” view, more market power in the loan market may result in higher bank risk as the higher interest rates charged to loan customers make it harder to repay loans, and exacerbate moral hazard and adverse selection problems. The two strands of the literature need not necessarily yield opposing predictions regarding the effects of competition and market power on stability in banking. Even if market power in the loan market results in riskier loan portfolios, the overall risks of banks need not increase if banks protect their franchise values by increasing their equity capital or engaging in other risk-mitigating techniques. We test these theories by regressing measures of loan risk, bank risk, and bank equity capital on several measures of market power, as well as indicators of the business environment, using data for 8,235 banks in 23 developed nations. Our results suggest that—consistent with the traditional “competition-fragility” view—banks with a higher degree of market power also have less overall risk exposure. The data also provides some support for one element of the “competition-stability” view—that market power increases loan portfolio risk. We show that this risk may be offset in part by higher equity capital ratios.
The ability of consumers to make informed financial decisions improves their ability to develop sound personal finance. This paper uses a panel data set from Russia, an economy in which household ...debt has grown at an astounding rate, to examine the importance of financial literacy and its effects on behavior. The paper studies both the financial and real consequences of financial illiteracy. Even though consumer borrowing increased very rapidly in Russia, only 41% of respondents demonstrate an understanding of interest compounding and only 46% can answer a simple question about inflation. Financial literacy is positively related to participation in financial markets and negatively related to the use of informal sources of borrowing. Moreover, individuals with higher financial literacy are significantly less likely to report experiencing a negative income shock during 2009 and have greater availability of unspent income and higher spending capacity. The relationship between financial literacy and availability of unspent income is higher in 2009, suggesting that financial literacy may better equip individuals to deal with macroeconomic shocks.
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