Trade Credit and Bank Finance – Evidence from the Visegrad Group

This paper examines whether bank finance is a substitute or complementary to trade credit for small and medium-sized enterprises (SMEs) in the region of the Visegrad Group – the Czech Republic, Poland, Hungary, and the Slovak Republic. This paper uses the data set provided by the Business Environmen...

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Bibliographic Details
Published inJournal of competitiveness Vol. 10; no. 3; pp. 132 - 148
Main Authors Rahman, Ashiqur, Rozsa, Zoltan, Cepel, Martin
Format Journal Article
LanguageEnglish
Published Zlin Tomas Bata University in Zlin, Faculty of Management and Economics 01.09.2018
Tomas Bata University in Zlín
Subjects
bank finance
Bank loans
Commercial credit
Small & medium sized enterprises-SME
small and medium-sized enterprises
trade credit
Visegrad Group
Poland
Czech Republic
Slovakia
Hungary
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Summary:This paper examines whether bank finance is a substitute or complementary to trade credit for small and medium-sized enterprises (SMEs) in the region of the Visegrad Group – the Czech Republic, Poland, Hungary, and the Slovak Republic. This paper uses the data set provided by the Business Environment and Enterprise Performance Survey that was conducted by the European Bank for Reconstruction and Development and the World Bank during the period from 2012 to 2014. Using a sample of 1,140 firms, it was discovered that firms having an overdraft facility from banks use more trade credit, and this supports the complementary theory of bank credit and trade credit. Moreover, the results suggest that companies that are younger, innovative, risky, with a concentrated ownership structure and operated by an experienced manager use more trade credit to purchase their material inputs and services. However, the results also show that service-oriented firms use less trade credit than manufacturing firms.
ISSN:1804-171X
1804-1728
DOI:10.7441/joc.2018.03.09