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- Title
How Local Finance and Enforcement Shaped SME Credit Choices before and during the COVID Crisis.
- Authors
Fasano, Francesco; La Rocca, Maurizio; Sánchez-Vidal, F. Javier; Lio, Maria Josephin; Cariola, Alfio
- Abstract
Credit from suppliers is an important source of finance for firms. It can sustain firms' financial flexibility even in periods of downturn. In this study, using a large database of 90,763 Italian firms in the 2015–2021 period, we investigated how local financial development affects the trade-credit policies of SMEs and how this effect is conditioned by the degree of judicial enforcement. Given that trade credit can be a substitute for bank financing, we find that firms make more use of trade credit in developed financial markets. Moreover, we highlight the finding that a higher degree of judicial enforcement, which reinforces the role of contracts in the market, amplifies this effect. Finally, we observe that the COVID-19 crisis has reduced both the positive effect of local financial development and the positive moderating effect of enforcement in the use of trade credit.
- Subjects
COVID-19 pandemic; LOCAL finance; SMALL business; DATABASES; FINANCIAL markets; CREDIT control
- Publication
International Journal of Financial Studies, 2024, Vol 12, Issue 1, p10
- ISSN
2227-7072
- Publication type
Article
- DOI
10.3390/ijfs12010010