An agency model to explain trade credit policy and empirical evidence

Julio Pindado (1) , Rafael Rabelo Bastos (2)

1 Dept Administracion y Economia de la Empresa
2 Business Economics

This paper explains trade credit policy based on the agency theory. According to this theory we have developed an agency model based on the adverse selection and moral hazard phenomena arising from the relation between sellers and buyers. This model has been estimated by using panel data methodology applied to UK companies. Our findings strongly support the model proposed. We find that smaller firms, those with a smaller proportion of fixed assets, and those that are less profitable extend more trade credit, whereas firms with a high proportion of variable costs and high percentage of bad debts extend less.

Mots clés: Social Sciences & Humanities

Julio Pindado, Rafael Rabelo Bastos. An agency model to explain trade credit policy and empirical evidence. Applied Economics, 2008, 39 (20), pp.2631-2642. ⟨10.1080/00036840600722232⟩. ⟨hal-00581945⟩