Value chain perspective on the use of trade credit during the 2006–2015 business cycle – evidence from Eurozone SMEs

ABSTRACT

In order to understand whether advanced chain spanning coordination is needed within the framework of supply chain finance, we address the question on how a business cycle affects the use of trade credit in different tiers of the value chain in SMEs. In order to address this research question, we utilise the panel regression analysis on a dataset comprising of a longitudinal sample of SME companies in the Eurozone over a period of 10 years from 2006 until 2015. We conclude that trade credit is counter-cyclical in nature, the business cycle has affected the value chain tiers with differing severity with manufacturing end of the value chain being the most affected, and there may exist a propagating liquidity shock in the value chain. Therefore, we suggest that supply chain spanning coordination of financing and trade credit is an essential area in advanced supply chain finance.

KEYWORDS:

• Trade credit
• payment times by country
• business cycle
• supply chain finance
• panel regression model

Disclosure statement

No potential conflict of interest was reported by the authors.

Additional information

Funding

This work was supported by Liikesivistysrahasto.