Trade Credit Contracts

46 Pages Posted: 20 Jun 2011

See all articles by Leora F. Klapper

Leora F. Klapper

World Bank; World Bank - Development Research Group (DECRG)

Luc Laeven

European Central Bank (ECB); Centre for Economic Policy Research (CEPR)

Raghuram G. Rajan

University of Chicago - Booth School of Business; International Monetary Fund (IMF); National Bureau of Economic Research (NBER)

Multiple version iconThere are 4 versions of this paper

Date Written: June 2011

Abstract

We employ a novel dataset on almost 30,000 trade credit contracts to describe the broad characteristics of the parties that contract together and the key contractual terms of these contracts. Whereas prior work has typically used information on only one side of the buyer-seller transaction, this paper utilizes information on both, allowing for the first analysis of buyer-seller pairs. An equally important distinction is that we have multiple contracts for the same buyer or supplier firms, rather than a firm-average response, allowing for the correction of time-invariant firm characteristics that might determine the choice of credit terms. We find that the largest and most creditworthy buyers receive contracts with the longest maturities from smaller suppliers, and that discounts for early payment tend to be offered to riskier buyers. (JEL G32)

Suggested Citation

Klapper, Leora F. and Laeven, Luc A. and Rajan, Raghuram G., Trade Credit Contracts (June 2011). NBER Working Paper No. w17146, Available at SSRN: https://ssrn.com/abstract=1866105

Leora F. Klapper (Contact Author)

World Bank ( email )

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World Bank - Development Research Group (DECRG)

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Luc A. Laeven

European Central Bank (ECB) ( email )

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Centre for Economic Policy Research (CEPR)

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Raghuram G. Rajan

University of Chicago - Booth School of Business ( email )

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National Bureau of Economic Research (NBER)

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