Trade credit and SME profitability

Abstract
Financial literature discusses the motives for trade credit provision by suppliers
in depth. However, there is no empirical evidence of the effect of granting trade
credit on the profitability of small and medium-sized firms. We examine the
profitability implications of providing financing to customers for a sample of
11,337 Spanish manufacturing SMEs during the 2000–2007 period. This article
also examines the differences in the profitability of trade credit according to
financial, operational, and commercial motives. The findings suggest that
managers can improve firm profitability by increasing their investment in
receivables and that the effect is greater for financially unconstrained firms
(larger and more liquid firms), for firms with volatile demand, and for firms
with bigger market shares.

Martínez-Sola, C., García-Teruel, P.J. & Martínez-Solano, P. Small Bus Econ (2014) 42: 561.
https://doi.org/10.1007/s11187-013-9491-y

https://link.springer.com/article/10.1007/s11187-013-9491-y#citeas

Determinants of the Capital Structures of European

SMEs
Graham C. Hall

Patrick J. Hutchinson

Nicos Michaelas

First published: 08 July 2004

https://doi.org/10.1111/j.0306-686X.2004.00554.x
Cited by: 102

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Abstract
The aim of this paper is to examine the degree to which the determinants of SMEs’ capital structures
differ between European countries. The study is based on data for four thousand SMEs, five
hundred from each of eight European countries. Regressions were run using short‐term and
long‐term debt as dependent variables and profitability, growth, asset structure, size and age as
independent variables. A key feature of this paper is the use of restricted and unrestricted
regressions to isolate the country‐effect from the firm‐specific‐effect. The results show that variations
are likely to be due to country differences as well as firm‐specific ones.