Trade credit behavior of Korean small and medium sized enterprises during the 1997 financial crisis

This paper investigates the effect of the 1997 Korean financial crisis on the trade credit behavior of Korean small and medium sized enterprises (SMEs) using a unique panel dataset for the period 1994 to 1999. I uncover new evidence supporting the substitution and redistribution hypotheses, which contradicts earlier studies. Specifically, the results show that liquid SMEs provided more trade credit to their client firms during the credit contraction, while financially constrained SMEs received more trade credit from their suppliers. Further, I find evidence that SMEs in financially distressed regions relied more on trade credit than their counterparts in financially healthier regions.     

Bank dependence and financial constraints on investment: Evidence from the corporate bond market paralysis in Japan

This paper investigates whether firms are able to substitute bank loans for public debt when the latter become less available to firms. To do so, this paper utilizes the 2008 financial crisis and its impact on Japanese markets as a natural experiment. Because the Japanese banking sector remained functional while the corporate bond markets were paralyzed, the data from Japan during this period provide us with an ideal environment to examine this hypothesis. I specifically examined whether firms with large holdings of corporate bonds maturing in FY2008 were financially constrained, by comparing the changes in their capital investment expenditures and borrowing conditions with those of bank-dependent firms. The main empirical results indicate that (1) firms with large holdings of corporate bonds maturing in FY2008 did not reduce investment expenditures; (2) instead, they exhibited higher increments in bank loans; and (3) firms that maintained relatively close bank-firm relationships had greater access to bank loans with low borrowing costs. These findings demonstrate that Japanese firms were able to substitute bank loans for public debt during the crisis and imply that the Japanese banking sector worked efficiently to replace public debt markets during the crisis.     

The role of information sharing in trade credit distribution: evidence from Thailand

Prior research has shown that information sharing among lenders facilitates bank credit allocation and reduces default rates. We examine the role of information sharing in trade credit allocation using a sample of publicly traded firms in Thailand over the 1994–2005 period. Taking the establishment of a private credit bureau in 1999 as signalling improvement in information sharing among lenders, we obtain three main results in the improved information sharing period: (1) Thai firms have become less dependent on supplier credit; (2) financially constrained firms redistribute more funds via trade credit; and (3) the relationships between the use of trade credit and firm‐specific factors such as liquidity, free cash flow, tangible assets, interest cost ratio, and firm size weaken as information sharing improves. Our results are consistent with the view that better information sharing facilitates credit allocation. Hence, policies aiming at facilitating information exchange among financial intermediaries should be supported. We also find support for the view that bank credit substitutes for trade credit. This substitution lowers firms' cost of capital, given that trade credit is assumed to be more costly than bank loans.     

Determinants of Trade Credit in the Japanese Manufacturing Sector

This paper examines the determinants of trade credit in Japanese manufacturing companies. The empirical analysis presents evidence that the volume of trade credit is influenced not only by transactional factors but also by financial positions. The empirical test reveals that firms' future business prospects affect the volume of trade credit. Notably, for small firms whose liquidity is constrained, nontransactional factors such as an increase in cash flow reduce the need for trade credit. This paper also finds that trade payables act as a complement to bank loans. The quantitative relationship between trade payables and bank loans suggests that when monetary policy works in the financial markets, it also influences the trade-related credit markets. J. Japan. Int. Econ., June 2001, 15(2), pp. 160–177. Department of Economics, Fukushima University, 1 Kanayagawa, Fukushima-shi, Fukushima 960-1296, Japan. Copyright 2001 Academic Press.Journal of Economic Literature Classification Numbers: E52, G32.     

分权化改革、政府干预与国有企业债务融资

债务融资一直是资本结构研究的重要内容。利用我国上市公司数据,采用规范研究和实证研究相结合的方法,对我国分权化改革和政府干预如何影响国有企业债务融资进行了分析。研究发现,企业所在地区的分权化程度越高,企业银行贷款率越高,政府干预对企业银行贷款影响越大。在考虑债务融资的性质差异基础上,进一步研究发现,企业所在地区的分权化程度越高,政府干预对长期借款的影响比短期借款大。上述研究说明,分权化改革影响着国有企业的债务融资行为,并使地方政府有很强的动机干预辖区内的国有企业债务融资行为。     

Outside Blockholders' Monitoring of Management and Debt Financing

Corporate governance mechanisms designed to alleviate manager‐shareholder agency conflicts can worsen shareholder‐bondholder conflicts. This study examines how one such corporate governance mechanism, monitoring by large outside shareholders, influences the choice between public and private debt. I conjecture and find that firms with higher outside blockholdings are inclined to choose bank loans over public debt when they borrow, consistent with the notion that banks are better monitors than public debt markets. I also find that bank loans carry less price protection than corporate bonds against increased agency risk associated with outside blocks. Corroborating the monitoring story, I document that bank loans contain more accounting‐based covenants and dividend restriction provisions for firms with higher outside blockholdings than for those with lower blockholdings. I find no such relation for public debt covenants. This supports that banks' monitoring of their loans counters the agency risk caused by blockholders. This study extends prior research that associates governance mechanisms with agency costs of debt, by incorporating lenders' differential monitoring mechanisms in the overall corporate governance system.     

Credit accessibility,institutional deficiency and entrepreneurship in China

Using a brand new data, we document seriously low credit accessibility from financial institutes for small and micro enterprises (SMEs) and examine whether and how it affects entrepreneurial activity in China. We find that credit constraints significantly decrease the possibility of households becoming entrepreneurs. Based on our estimates, 10% decrease in the probability of being credit constrained would be associated with 4.3 million newly-created household businesses, or equivalently 11 million jobs. In the end, factors that determine credit accessibility are exploited and the result indicates that institutional deficiency plays a role in shaping the pattern of financing difficulties in China. Specifically, we find households in regions with more commercialized banking or those with government-sector workers are more likely to access to credit when other relevant variables are conditioned. In particular, the positive role of government-sector workers is more pronounced in regions with weaker market institutions.     

The effect of bank account ownership on credit and consumption: Evidence from the UK

This article examines the causal effects of bank account ownership on credit access and consumption by isolating an exogenous change in account ownership produced by an electronic transfer mandate in the universal UK Child Benefit program. Comparing households with and without children finds that the mandate substantially affected banking behavior, with an 8.6% relative increase in transaction account ownership. When households transition into account ownership, results indicate large increases in credit card ownership (89%), and household durable goods (55%). Similar changes are not seen in loan use, weekly expenditures, or vehicle ownership. Additional evidence from a panel data set indicate declines in the use of fringe bank credit, informal loans, and debt after households transition into bank account ownership. In total, evidence suggests that an important effect of owning a bank account is improved access to credit cards which enables durable good consumption.     

分成制需求方教育金融制度的理论渊源

在中国,传统的教育金融制度主要表现为助学贷款,目前也出现了在校园销售信用卡的业务.这些债权式教育金融制度不具有良好的"风险-收益"对称性,也不利于资金需求方转移风险.由于交易成本的存在和规避风险的需要,分成制教育金融制度是一种能克服债权类教育金融制度的有效合约.事实上,从现实中所存在的"租佃分成制"、"明星-经纪人盈利模式"以及"接收入比例还贷"等合约中,可以找到分成制的理论原型.     

Does a large loss of bank capital cause Evergreening? Evidence from Japan

Using the real estate lending share of the bank’s loan portfolio at the peak of the land-price bubble as an instrument for bank capital, we identify the impact of capital adequacy on the allocation of bank lending under the Basel regulatory framework. We find that, in Japan, a large loss of bank capital caused by the regulator’s excessively tough stance towards banks not only induced the contraction of the bank lending supply but also the banks’ reallocation of their lending portfolios to financially unhealthy industries with a higher concentration of non-performing loans.     

Struggle for survival in credit crunch: The effect of interest rate deregulation in China

This study investigates how interest rate deregulation affects firms' financing choice between bank debt and public debt. Our analysis exploits China's 2013 bank interest rate floor deregulation as an exogenous shock to the supply of bank credit. Using a difference-in-difference design, we find that firms with higher default risk substitute away from bank loan and switch to public debt after the 2013 deregulation. However, this substitution to public debt is limited, leading to a dramatic decline in debt ratio. Our result also demonstrates that the effect on firms' public debt financing is more pronounced for firms with better information environments, suggesting that good information environment is an important prerequisite for making the switch. This switching, contradicting to traditional financing framework that high-risk firms prefer bank loans, inevitably is costly. Compared with low-risk firms, bonds issued by high-risk firms have significantly higher spreads, a higher likelihood of being secured, and a higher tendency of including an interest-adjusted clause. More importantly, we also document that high-risk firms subsequently improve their information transparency after the interest rate deregulation. Our findings highlight the role of interest rate deregulation in firms' financing choice and illustrate that firms incur high switching costs when their choice deviates from the optimal financing choice.     

Do Credit Cards Really Reduce Aggregate Money Holdings?

This paper discusses whether the use of credit cards reduces aggregate money holdings in an economy. Applying and modifying the Baumol-Tobin model (Baumol Quarterly Journal of Economics 66:545–556, 1952 and Tobin Review of Economics and Statistics 38(3):241–247, 1956), it studies how much money a credit card bank would normally maintain to support retail trade, and shows that whether or not the use of credit cards actually reduces the aggregate demand for money depends on how often consumers visit the bank and how long it takes to clear a check. With innovations in the banking industry such as ATMs, online banking, and other electric funds transfer services, the cost of visiting banks (i.e., switching funds between a checkable account and an interest-earning account) is now very low. For the whole economy, as a result, the use of credit cards may not necessarily reduce aggregate money holdings.     

Small and Medium Enterprise Financing in Transition Economies

This paper studies the financing status of small and medium enterprises (SMEs) in transition economies. Factors causing financing obstacles are indentified and further analyzed to determine their influence over financing patterns. Bank regulatory practices relevant to SMEs’ access to bank loans and their influence over loan structures are identified. This study contributes to the existing body of knowledge by exploring the impact of specific bank regulatory practices on credit lending to SMEs in transition economies.     

科技型中小企业金融支持的策略分析

科技型中小企业自身特殊性、商业银行信贷风险防范、企业经营缺陷、资本市场不完善、信用担保体系不健全以及风险投资机制不规范等,是造成当前科技型中小企业融资困境的主要因素.本文提出从设立科技银行、知识产权质押贷款、集合保理融资、产业集群内担保贷款等方面创新间接融资渠道,同时扩大资本市场融资、鼓励风险投资和加大政府扶持来应对科技型中小企业融资困境.     

Information contents of collateral under heterogeneous borrower qualities on the bank loans market in China

We analyze the risk of default and provision of collateral for bank loans made to firms of varied credit qualities using a unique dataset obtained from a major state-owned commercial bank in China. Both high and low quality borrowers provide collateral more often than medium quality debtors do. Using models that explicitly incorporate heterogeneous borrower qualities, we find a positive relation between collateralization and risk of default for loans issued to debtors with low credit ratings. In contrast, collateral provided by debtors with high credit ratings is negatively associated with the risk of default. These results suggest that low quality borrowers may be required to provide collateral at the bank's request to mitigate moral hazard problem. On the other hand, high quality borrowers may provide collateral willingly to signal quality in order to mitigate adverse selection problem when competing for getting access to bank loans. Our findings shed new lights on different information contents of collateral on the bank loans market of China, and have important implications for banks in screening, contracting and monitoring the risk of commercial loans for clients with diverse credit qualities.     

辽宁中小企业融资困境成因与对策研究

导致辽宁中小企业融资困难的因素很多,但企业自身经营状况不善、信用缺失、金融体系发展滞后、金融创新不足以及政府政策扶持力度不够是主要原因。破解中小企业融资困境不仅需要企业自身提高经营管理和诚信水平,加强与银行的联系,更需要各级政府尽快完善中小企业融资的有关政策和服务体系以及不断深化金融体系改革,为中小企业发展创造良好的资金环境。     

Challenges to small and medium-size businesses in Myanmar: What are they and how do we know?

We conducted a field survey of owners of small and medium enterprises (SMEs) in Yangon, Myanmar to investigate obstacles to business development in the region. The analysis focuses on access to credit, public services, and electricity. We find that relaxing loan collateral requirements is considered of prime importance, while access to bank loans is seen as problematic (equivalent to a 19 percentage point increase in the interest rate). Yet despite their widespread appeal to governments and donors, SME loans are found to have no discernible impact on perceived access to credit. Access to public services is hampered by cumbersome and time consuming procedures, often necessitating daylong trips to the capital for administrative procedures. Streamlining such procedures could yield annual savings of up to US $4700 per business. With regard to electricity, the biggest problems are installing new connections and the unreliability of supply. For benchmarking of concerns, we showed respondents vignettes describing hypothetical businesses facing a particular difficulty, and asked them to rate the gravity of the problem. Although we find some differences in response scales across socio-economic and ethnic groups, the qualitative conclusions about which problems are most important generally hold. This suggests that broad-based policy intervention aimed at easing a particular difficulty can be implemented.     

Riding out the COVID-19 storm: How government policies affect SMEs in China

Based on a nationally representative survey on SMEs in China, we study the impact of government policy interventions on SMEs during the COVID-19 pandemic. Our findings are three-fold. First, relief policies in the form of payment deferrals and exemptions significantly improve SMEs' cash flows and further stimulate their operational recovery. This effect is more pronounced for firms with larger shares of high-skilled employees. Second, financial support policies do not appear to be effective in alleviating SMEs' cash constraints or encouraging the reopening of small businesses, potentially due to difficulties in accessing policy-oriented loans and misallocation of credit. Last, regional and local lock-down policies decrease SMEs' incidence of reopening and delay their expected reopening in the near future, likely by reducing consumer demand. Our findings shed new light on the policy debates on supporting SMEs during the COVID-19 pandemic.     

The effects of credit lines on cash holdings and capital investment: Evidence from Japan

This study examines how credit lines affect corporate cash holdings and capital investment using a hand-collected data on publicly traded Japanese firms from 2006 to 2017. The study compares firms with and without credit lines to investigate the effects of credit lines. The empirical results are as follows: (1) Firms with credit lines hold smaller cash reserves than those without; (2) Firms with credit lines undertake more capital investment than those without; (3) The effects of credit lines are more amplified for financially constrained firms than their counterpart; (4) A close bank–firm relationship plays a positive role in the effect of credit lines on corporate activities.These empirical findings indicate that credit lines can improve firms’ financial flexibility and allow them to use cash holdings held for precautionary reasons to invest. The results also show that credit lines and the attendant implicit bank–firm relationships are complementary to each other. Moreover, having both credit lines and a close bank–firm relationship is important to Japanese firms for their corporate activities. Furthermore, the results imply that the use of credit lines is still relatively undeveloped in Japan, which may be a reason for the country's large corporate savings and lackluster investment.     

Family size,birth order and educational attainment: Evidence from China

Using Chinese Household Income Project survey data from 2013, this paper investigates the effects of family size and birth order on children's educational attainment. The endogeneity of family size is an important identification issue in the test of the quantity-quality tradeoff. We use variations in a mother's exposure to various phases of China's family planning policies by Hukou type, ethnicity and regional differences in fine rates as instruments to identify the causal effects of family size. We find that family size has a negative effect on children's education. Using family fixed effects model, we find a positive birth order effect. In addition, both the family size and birth order effects are more pronounced for families where first-born children are females than those where the first-borns are males. Birth order effect is more evident in financially constrained families.