Trust and trade credit - PEGFA Seminar

Greenwich Campus

QM369

This event is part of PEGFA’s seminar series where current research papers are presented and discussed. It will be split into two sessions. In the first talk we will hear Bao Trung Hoang present a paper on 'Trust and trade credit', which is described in the abstract below. 

More details on the second talk and other PEGFA seminars

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Social trust is a form of reputational capital. When people in a society are viewed as trustworthy, they are expected to follow shared norms and fulfil obligations, behaving reliably even without prior relationships. In this research, we examine how this form of social‑based capital affects the trade credit approval of SME firms across 16 European countries. Unlike prior studies that employ accounting data, we use responses from the Survey on the Access to Finance of Enterprises (SAFE), incorporated into a binomial‑tree framework. Our results show that SMEs in countries with higher levels of social trust have higher probabilities (or odds ratios) of having their trade credit applications approved. When examining the conditions of trade credit, firms in high‑trust environments are also more likely to receive unconditional approval (100% in full) and face fewer conditional terms such as credit limits or price discrimination. The findings further suggest that, in the context of SME trade credit, trust capital can substitute for reliance on legal enforcement.

Presenter:
Bao Trung Hoang

Co-authors:
Mary-Paz Arrieta Paredes, Nadia Benbouzid, Aleksandar Stojanovic

Location:
University of Greenwich, Queen Mary Building, QM369

Teams (Online) details:

Meeting ID: 319 421 430 872 5
Passcode: N9eW6W66

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