THE IMPACT OF THE EQUITY CAPITAL AND TRADE CREDIT FINANCIAL SOURCES ON THE COMPANYS PERFORMANCES SUSTAINABILITY

Authors

DOI:

https://doi.org/10.5937/ekoPolj2003735M

Keywords:

agribusiness, trade credit, equity capital, financial conditions, SMEs, performance sustainability

Abstract

The crucial aspect of mobilizing financial sources and savings to SMEs in the agribusiness sector and its supply chains towards sustainability and productive investment is of the most importance, what has motivated the research of this paper. Key findings of exploring the impact of two external sources of finance, trade credit and equity capital on the sustainability of the enterprises, are based on the literature review and the empirical research provided in Serbia in 2019. The positive influence of the researched sources of the financing as well as the conditions of this financing on the sustainability of these enterprises is confirmed. The contribution of the research results can be seen in the further improvement of the financial market framework for development of the external sources of finance, trade credit and equity capital in the context of entrepreneurial finance.

Downloads

Download data is not yet available.

References

1. Ahmed, Z.U. (1989). Effective Costs of Rural Loans in Bangladesh. World Development, 17(3), 357-363. doi: https://doi.org/10.1016/0305-750X(89)90209-X
2. Besley, T. (1994). Savings, Credit and Insurance, in Jere Behrman and T.N. Srinivasan (eds.), Handbook of Development Economics, 3, 2123-2207. doi: https://doi.org/10.1016/S1573-4471(05)80008-7
3. Băncescu, I., Chivu, L., Preda, V., Puente-Ajovín, M., & Ramos, A. (2019). Comparisons of log-normal mixture and Pareto tails, GB2 or log-normal body of Romanias all cities size distribution. Physica A: Statistical Mechanics and its Applications, 526, 121017. doi: https://doi.org/10.1016/j.physa.2019.04.253
4. Blazenko, G., & Vandezande, K. (2003). Corporate holdings of fnished goods inventories. Journal of Economics and Business, 55(3), 255 – 266. doi: https://doi.org/10.1016/S0148-6195(03)00023-7
5. Bougheas, S., Mateut, S., & Mizen, P. (2009). Coroprate trade credit and inventories. Journal of Banking & Finance, 33(2), 300-307. doi: https://doi.org/10.1016/j.jbankfn.2008.07.01
6. Bowles, S. (2003). Microeconomics: Behavior, Institutions, and Evolution. Princeton: Princeton, University Press. doi: https://doi.org/10.1515/9781400829316
7. Clive, B., Srinivasan, T.N., & Udry, C. (1997). Rationing, Spillover, and Interlinking in Credit Markets: The Case of Rural Punjab. Oxford Economic Papers, 49(4), 557-585. doi: https://doi.org/10.1093/oxfordjournals.oep.a028625
8. Conning, J., & Udry, C. (2005). Rural Financial Markets in Developing Countries. Handbook of Agricultural Economics, 3, 2857-2908. doi: https://doi.org/10.1016/S1574-0072(06)03056-8
9. Diamond, D. (1984). Financial intermediation and delegated monitoring. Review of Economic Studies, 51, 393-414. doi: https://doi.org/10.2307/2297430
10. Eck, K., Engemann, M., & Schnitzer, M. (2015). How trade credits foster exporting. Review of World Economics, 151(1), 73-101. doi: https://doi.org/10.1007/s10290-014-0203-8
11. Fazzari, S.M., & Petersen, B. (1993). Working capital and fixed investment: new evidence on fnancing constraints. Rand Journal of Economics, 24, 328 – 342. doi: https://doi.org/10.2307/2555961
12. Ferris, J.S. (1981). A transactions Theory of trade credit use. Quurterly Journalof Economics, 96(2), 243-270.
13. Frank, M., & Maksimovic, V. (1998). Trade Credit, Collateral, and Adverse Selection, University of Maryland.
14. Franks, J., & Sussman, O. (2005). Financial Innovations and Corporate Insolvency. Journal of Financial Intermediation, 9(1), 65–96.
15. Garcia-Teruel, P.J., & Martinez-Solano, P. (2007). Effects of working capital management on SME proftability. International Journal of Managerial Finance, 3, 164 – 177. doi: https://doi.org/10.1108/17439130710738718
16. Hart, O., & Moore, J. (1991). A theory of debt based on the inalienability of human capital, Working paper, MIT.
17. Hawawini, G., Viallet, C., & Vora, A. (1986). Industry influence on corporate working capital decisions. Sloan Management Review, 27, 15 – 24.
18. Hill, M., Kelly, W., & Lockhart, B. (2013). Downstream Value of Upstream Finance. Financial Review, 48(4), 697-723. doi: https://doi.org/10.1111/fre.12021
19. Hill, M., Kelly, W., & Lockhart, B. (2012). Shareholder Returns from Supplying Trade Credit. Financial Management 41(1), 255-280. doi: https://doi.org/10.1111/j.1755-053x.2012.01198.x
20. Love, I., & Zaidi, R. (2010). Trade Credit, Bank Credit and Financial Crisis. International Review of Finance, 10(1), 125-147. doi: https://doi.org/10.1111/j.1468-2443.2009.01100.x
21. Madestam, A. (2013). Informal Finance: A Theory of Moneylenders. Journal of Development Economics, 107, 157-174. doi: https://doi.org/10.1016/j.jdeveco.2013.11.001
22. Martínez-Sola, C., García-Teruel, P., & Martínez-Solano, P. (2013). Trade credit policy and frm value. Accounting & Finance, 53(3), 791-808. doi: https://doi.org/10.1111/j.1467-629x.2012.00488.x
23. Mateut, S., Mizen, P., & Ziane, Y. (2015). Inventory composition and trade credit. International Review of Financial Analysis, 42, 434-446. doi: https://doi.org/10.1016/j.irfa.2015.09.008
24. Meltzer, A.H. (1960). Mercantile Credit, Monetary Policy and Size of Firms. Review of Economics and Statistics, 42, 429-437. doi: https://doi.org/10.2307/1925692
25. Mian, S., & Smith. C.F. (1992). Accounts Receivable Management Policy: Theory and Evidence. The Journal of Finance, 47(1), 169-200. doi: https://doi.org/10.1111/j.1540-6261.1992.tb03982.x
26. Menichini, A.M. (2011). Inter-Firm Trade Finance in Times of Crisis. The World Economy, 34(10), 1788-1808. doi: https://doi.org/10.1111/j.1467-9701.2011.01390.x
27. More, D., & Basu, P. (2013). Challenges of supply chain finance. Business Process Management Journal, 19(4), 624-647. doi: https://doi.org/10.1108/BPMJ-09-2012-0093
28. Murray, F., & Maksimovic, V. (1998). Trade Credit, Collateral, and Adverse Selection, University of Maryland.
29. Myers, S.C., & Rajan, R.G. (1998). The Paradox of Liquidity. Quarterly Journal of Economics, 113(3), 733–771. doi: https://doi.org/10.1162/003355398555739
30. Myers, S.C. (1977). Determinants of corporate borrowing. Journal of Financial Economics, 5(2), 147 – 175. doi: https://doi.org/10.1016/0304-405X(77)90015-0
31. Nilsen, J. (2002). Trade credit and the bank lending channel. Journal of Money, Credit and Banking, 34(1), 226-253. doi: https://doi.org/10.1353/mcb.2002.0032
32. Petersen, M., & Rajan, R. (1997). Trade credit: theories and evidence. Review of Financial Studies, 10(3), 661 – 691. doi: https://doi.org/10.1093/rfs/10.3.661
33. Petersen, M., & Rajan, R. (1995). The Effect of Credit Market Competition on Lending Relationships, Quarterly Joumlof Economics, 60, 407-444. doi: https://doi.org/10.2307/2118445
34. Petersen, M., & Rajan, R. (1994). The Benefts of Lending Relationships: Evidence from Small Business Data. Journal of Finance, 49(1), 3-37. doi: https://doi.org/10.1111/j.1540-6261.1994.tb04418.x
35. Ramey, V.A. (1992). The Source of Fluctuations in Money. Journal of Monetary Economics, 30(2), 171–93. doi: https://doi.org/10.1016/0304-3932(92)90059-B
36. Rajan, R., & Zingales, L. (2003). Saving capitalism from the capitalists: unleashing the power of financial markets to create wealth and spread opportunity. 1st ed. Book, Whole vols. New York: Crown Business.
37. Ray, D. (1998). Development economics, Princeton, N.J.: Princeton University Press.
38. Schmidt-Eisenlohr, T. (2013). Towards a theory of trade finance. Journal of International Economics, 91(1), 96-112. doi: https://doi.org/10.1016/j.jinteco.2013.04.005
39. Slovin, M.B., Myron, B.,Marie, E., Sushka, M., & Polonchek, J. (1993). The value of bank durability: borrowers as bank stakeholders. Journal of Finance, 48, 247-266. doi: https://doi.org/10.1111/j.1540-6261.1993.tb04708.x
40. Smith, J. (1987). Trade Credit and Information Asymmetry. Journal of Finance, 42(4), 863-869. doi: https://doi.org/10.2307/2328295
41. Smith, K. (1980). Readings on the Management of Working Capital, West Publishing Co.
42. Schwartz, R.A., & Whitcomb, S. (1979). The trade credit decision. In Bicksler, J.ed: Handbook of Financial Economics (North Holland Publishing Company).
43. Schwartz, R.A. (1974). An Economic Model of Trade Credit. Journal of Financial and Quantitative Analysis, 9(4), 643-657. doi: https://doi.org/10.2307/2329765
44. Uchida, H., Udell, G., & Watanabe, W. (2013). Are trade creditors relationship lenders? Japan and the World Economy, 25-26, 24-38. doi: https://doi.org/10.1016/j.japwor.2013.01.002
45. Walker, D. (1991). An empirical analysis on financing the small firm. Advances in Small Business Finance, 47 – 61. doi: https://doi.org/10.1111/0022-1082.00203
46. Wilner, B.S. (2000). The exploitation of relationships in financial distress: the case of trade credit. Journal of Finance, 55, 153 – 178. doi: https://doi.org/10.1111/0022-1082.00203
47. Wu, Q.S. (2001). The determinant of working capital management policy and its impact on performance, National Science Council Project, Project No. NSC, 89.

Downloads

Published

2020-09-29

How to Cite

Milosević, D., Popović, J., Avakumović, J., & Kvrgić, G. (2020). THE IMPACT OF THE EQUITY CAPITAL AND TRADE CREDIT FINANCIAL SOURCES ON THE COMPANYS PERFORMANCES SUSTAINABILITY. Economics of Agriculture, 67(3), 735–746. https://doi.org/10.5937/ekoPolj2003735M

Issue

Section

Original scientific papers