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Factors behind trade credit financing of SMEs in Croatia
Author(s) -
Sandra Pepur,
Dujam Kovač,
Marijana Ćurak
Publication year - 2020
Publication title -
zbornik veleučilišta u rijeci
Language(s) - English
Resource type - Journals
eISSN - 1849-1723
pISSN - 1848-1299
DOI - 10.31784/zvr.8.1.11
Subject(s) - trade credit , business , finance , intermediary , external financing , european union , financial intermediary , panel data , access to finance , financial system , economics , international trade , debt , econometrics
Small and medium enterprises (SMEs) contribute to the national economy in terms of employment, added value, knowledge generation, and innovation. However, their potential and in the case of economic downturns even their survival is affected by the difficulties in their access to external financing under acceptable terms and adequate timing and amount. In the case of asymmetric information problems, which make SMEs more sensitive to financial market imperfections, trade credit can be a valuable source of financing. In the European Union, trade credit is among the most relevant external funding sources and it is among the most important alternatives to financial intermediaries’ financing. However, there are substantial differences between the countries with respect to availability and use of trade credit. Therefore, this research examines determining (company-specific and country-specific) factors behind the use of trade credit as a financing source in Croatia.The empirical analysis is based on the data for 1,225 SMEs operating inCroatia in the period from 2008 to 2017 and is done using the panel data methodology. The findings confirm that firms’ characteristics, as well as the characteristics of financial, macroeconomic and legal environment in which the firms operate, influence the use of trade credit in SMEs in Croatia. The paper contributes to relatively scarce empirical evidence on the determinants of trade credit use by SMEs in South-East European countries.