Sarria Allende, V.; Preve, L.; Hill, M.; Hill, K., 2019. International evidence on the determinants of trade credit provision. Managerial Finance, Vol. 45 Issue: 4: pp.484-498.
Purpose: The purpose of this paper is to examine whether the level of financial credit available in a country influences the level of trade credit provided to customers.
Design/methodology/approach: The authors examine the association between the supply of trade credit and the availability of country-level private financial credit using multivariate regression models that account for country-level heterogeneity, macroeconomic conditions and firm-specific characteristics. The data set is a pooled sample of publicly traded firms incorporated in 66 countries.
Findings: Supporting the re-distributional view of trade credit, robust results suggest that suppliers incorporated in countries with increased access to financial credit provide increased trade credit to their customers. Further results indicate significant differences in trade credit usage across geographical regions. Consistent with existing research using samples of US firms, the use of trade credit is correlated with firm-level measures of financial constraints and product market dynamics.
Originality/value: The authors provide one of the first studies to examine differences in trade credit extension across a large number of countries.
Pasquini, R.; Robiolo, G.; Sarria Allende, V., 2018. Matching in Entrepreneurial Finance Networks. Venture Capital. Special Issue "Venture Capital: An international Journal of Entrepreneurial Finance" , Forthcoming: .
We empirically explore the importance of networks in the match formation of startups and investors. Using a massive network of connections from the entrepreneurial finance setting in California, we estimate a matching model introducing network distance as a key determinant of the value of a prospective match. We find that distance drives matching value and moderates preferences for experience and education. While we corroborate that there is significant sorting along these preferences in realized matches, our results indicate that network distance can potentially outweigh their impact, emphasizing the role of networks in alleviating matching frictions in these markets.
Hill, M. D.; Kelly, G. W.; Preve, L.; Sarria Allende, V., 2017. Trade Credit or Financial Credit? An International Study of the Choice and Its Influences. Emerging Markets Finance & Trade Journal. Special Issue: Capital Markets and Firm Performance in Emerging Economies, Vol. 53, Issue 10: pp. 2318-2332 .
Trade credit financing has usually been assumed to be an expensive source of funds. Recent studies, however, suggested that it can be available at either low or no cost. Using an international panel of firms, we provide an empirical answer to this matter. We analyze the type of firms and financial environments that are associated with a relatively more intense use of financial credit and, consistent with the mainstream literature, we find that trade credit financing is chosen by firms that have more restricted access to financial credit. These results appear to be stronger for firms located in emerging markets.
Vassolo, R.; García Sánchez, J.; Mesquita, L., 2017. Competitive Dynamics and Early Mover Advantages under Economic Recessions. Revista de Administração de Empresas, Vol. 57, No. 1: .
In light of the recent macroeconomic instability in global markets, we examine the evolution of competitive dynamics and firm profitability when industries are subject to recessions. Although ordinary intuition leads most to view recessions as harmful, we highlight conditions under which they enhance the relative value of industry-level supply-side isolating mechanisms, thereby affording early movers significant and sustainable profit advantages vis-à-vis laggards. We observe that the distribution of firm size within the industry switches from a bi-modal distribution (i.e., one dominated by both small and large firms) to a right-skewed one (i.e., dominated mostly by large firms) in these contexts, thereby signaling the rise of important opportunities in the form of less rivalrous competitive contexts for survivors of recessions. We derive our results from formal modeling and multiple simulation runs.
García Sánchez, J., 2014. Are the preferences really revealed? . Energeia-International Journal of Philosophy and Methodology of Economics , Vol. 6, Nr. 1: pp. 7-22.
Mezquita, L., García Sánchez, J., Vassolo, R. , 2014. What doesn’t kill you makes you stronger: The evolution of competition and entry-order advantages in economically turbulent contexts. Strategic Management Journal, Volume 35, Issue 13: 1972–1992.
We examine the evolution of competition and entry-order advantages in markets under macroeconomic distress. Through formal modeling of early-mover advantages along industry life cycles subjected to economic shocks and based on simulation findings, we propose that such shocks exogenously induce temporary industry discontinuities that shift the relative value of distinct asset endowments, thereby switching the bases for competitive advantages vis-à-vis those found in stable contexts. A vital trade-off then emerges between a firm's financial flexibility and its pace of investments in isolating mechanisms, such that the former operates as a contingency factor for the latter. As such, flexibility superiority boosts early-entrants' advantages, while it alternatively gives laggards a much desired strength to out trump first-mover rivals. Our study informs entry-order advantage theory and management practice in economically turbulent contexts.
Etiennot, H.; Preve, L.; Sarria Allende, V. , 2012. Working Capital Management: An exploratory study. Journal of Applied Finance, Vol. 22, No. 1: .
Working capital management is an issue in which finance research is scarce. One possible reason behind this fact might relate to the relative ease with which efficient financial markets correct deviations from optimal working capital policies. However, in less efficient financial markets, pervasive among emerging economies, working capital management is critical for both firms performance and survival. The difference in the market's ability for providing immediate assistance to firms might explain the differential consequences on firms' profitability and financial distress. This article explains the fundamentals of working capital management, the importance of its interaction with financial markets, and how this interaction might explain working capital patterns around the world.
Maquieira, C., Preve, L., Sarria Allende, V., 2012. Theory and Practice of Corporate Finance: Evidence and Distinctive Features in Latin America . Emerging Markets Review, Vol. 13, Issue 2 : pp. 118-148.
We survey 290 LATAM firms on capital budgeting, cost of capital and capital structure issues. We analyze the results and compare them to those of other studies. We interpret differences according to special features characterizing both emerging markets and SME. We observe that LATAM firms make use of standard capital budgeting techniques, but give special weight to liquidity and capital rationing considerations. They rely less on cost of capital formal estimations; rather, they use investors' requests as their primordial input. Finally, surveyed firms are less leveraged, and inclined toward stressing the role of internal financing and minimizing payment commitments.
Molina, C.; Preve, L., 2012. An empirical analysis of the effect of financial distress on trade credit. Financial Management, Vol. 41, Issue 1: pp. 187-205.
This paper studies the use of supplier's trade credit by firms in financial distress. Trade credit represents a large portion of firms’ short-term financing and plays an important role in financial distress. We find that firms in financial distress use a significantly larger amount of trade credit to substitute for alternative sources of financing. Firms that are smaller, with less market power, and with more unique products tend to use more trade credit financing when in distress. We also find that firms that significantly increase their trade payables when in financial distress, experience an additional drop of at least 11% in sales and profitability growth over the previously documented 21% average drop for financially troubled firms.
Fisman, R., & Sarria Allende, V. , 2010. The regulation of entry and the distortion of industrial organization. Journal of Applied Economics, : .
"We study the distortions of industrial organization caused by entry regulation. We take advantage of heterogeneity across industries in their natural barriers and growth opportunities
to examine whether industries are differentially affected in countries according to entry regulation. First, we consider the effect of entry regulation on the (static) industry structure.
We find that regulation has a greater impact in industries with lower natural barriers to entry, both on the number of firms and on the average size of firms. We find that the effect of entry regulation on industry share is not related to differences in natural barriers. Regarding industry dynamics, we find that in countries with high entry regulation, industries respond to growth opportunities through the expansion of existing firms, while in countries with low entry regulation, growth opportunities lead to the creation of new firms; finally, the total sectoral response is invariant to the level of regulation."
García Sánchez, J., Preve, L., & Sarria Allende, V., 2010. Valuation in emerging markets: A simulation approach. Journal of Applied Corporate Finance, : .
Preve, L. Molina, C., 2009. Trade receivables policy of distressed firms and its effect on the cost of financial distress. Financial Management , : .
"This paper studies the trade receivables policy of distressed firms as the trade-off between the firm's willingness to gain sales and the firm's need for cash. We find that firms increase trade receivables when they have profitability problems, but reduce trade receivables when they have cash flow problems. We also find that a firm that significantly cuts its trade receivables when in financial distress will experience an additional drop of at least 13% in sales and stock returns over the previously documented 20% average drop for financially troubled firms. Moreover, the performance decline of a firm in financial distress is significantly higher if the firm cuts trade receivables than if it does not."
Love, I. Preve, L. & Sarria Allende, V., 2007. Trade credit and bank credit: Evidence from recent financial crises . Journal of Financial Economics , : .
This paper studies the effect of financial crises on trade credit in a sample of 890 firms in six emerging economies. We find that although the provision of trade credit increases right after the crisis, it contracts in the following months and years. We observe that firms whose financial position is more vulnerable to crises, are more likely to extend less trade credit to their customers; based on this observation, we argue that the decline in aggregate trade credit ratios is driven by the reduction in the supply of trade credit that follows a bank credit crunch. Our results are consistent with the “redistribution view” of trade credit provision, according to which bank credit is redistributed via trade credit from firms with a stronger financial position to firms with a weaker financial stand.
Vassolo, R., García Sánchez, J. & Weisz, N., 2007. Motivación emprendedora y teoría de los stakeholders . Revista Empresa y Humanismo, : .
Este trabajo desarrolla una justificación motivacional para la teoría de los stakeholders. La perspectiva metodológica es diferente y complementaria de las anteriores, que imponen consideraciones normativas a esta teoría. Enfocado en el proceso emprendedor, analiza los mecanismos que explican las acciones y el alineamiento de los distintos participantes. El argumento principal es que cada grupo de interés actúa motivado tanto por el resultado de sus acciones como por el aprendizaje que genera el proceso en sí mismo. A su vez, ese proceso, como motivación central, provee una identidad individual y colectiva y, en último término, explica el alineamiento de los distintos grupos. Este argumento tiene implicaciones tanto a nivel directivo como normativo.