Burkart and Ellingsen’s (2004) model of trade credit and bank credit rationing predicts that trade credit will be used by medium-wealth and low-wealth firms to help ease bank credit rationing. The author tests these and other predictions of Burkart and Ellingsen’s model using a large sample of more than 28,000 Canadian firms. She uses an endogenous method to divide the firms into the appropriat...

We examine a novel but economically important characterization of trade credit relationships in which smaller, often credit constrained, suppliers provide financing for their larger investmentgrade buyers. Using variation in large retailers’ cash management policies to instrument for how quickly individual vendors are paid, we show that firms are forced to cut back on investment in new plants a...

Empirical evidence documents a tight link between aggregate and firm-level investment and corporate credit spreads. Moreover, it has been shown that credit spreads largely reflect a compensation for bearing macroeconoimc risks. We use a tractable model with recursive preferences and time varying macroeoconomic risk to investigate the link between aggregate risk and corporate policies in a produ...

This paper examines the development of financial markets in Mexico after 1994 and finds that there has been a reduction in the depth of the traditional financial markets. Lending from commercial banks to the non-financial private sector shrank from 10% of GDP in 1994 to 0.3% in 2000. However, gross domestic investment recovered quickly. Key questions are: where are firms getting financing; are ...

In the newsvendor problem, a decision maker chooses an inventory order quantity prior to the realization of a random demand. The decision maker faces a trade-off between ordering too many and having leftover inventory versus ordering too few and missing out on potential sales. Keeping the net profit structure constant, we study how the timing of the payments affects the inventory decisions. Spe...

credit enhancements are methods that are used in structured finance for promoting the credit quality of financial instruments. one of the most important mechanisms for improving the credit quality is tranching financial instruments. this mechanism is mentioned as a structural and internal credit enhancement. tranching decreases financing costs and improves the quality of financial instruments. ...

Singapore is well-positioned as a global hub for logistics and supply chain management. Singapore’s modern industry has five main characteristics: high efficiency, robust technology, strong professionalism, service concentration strength. foreign trade-driven economic model. With the prosperity of cross-border trade, companies in seek diversification expansion technology finance. This paper mai...

The paper investigates a two-echelon production-delivery supply chain model for products with stochastic demand and backorder-lost sales mixture under trade-credit financing. manufacturer delivers the retailer’s order quantity in number of equal-sized shipments. replenishment lead-time is such that it can be crashed to minimum duration at an additional cost treated as investment. Shortages inve...

This paper considers a two-echelon supply chain consisting of supplier and capital-constrained retailer. Both the retailer are risk-averse decision makers. The may adopt two mixed financing modes: (1) bank credit equity (BEF) (2) trade (TEF). Using mean-variance framework, we analyze members ordering decisions in cases: symmetric asymmetric risk aversion threshold information. In case informati...