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Title: Trade credit terms: Asymmetric information and price discrimination evidence from three continents
Authors: Pike, R.
Cheng, N.S. 
Cravens, K.
Lamminmaki, D.
Keywords: Cross-national comparison
Information asymmetry
Price discrimination
Trade credit
Two-part terms (prompt payment discount)
Issue Date: 2005
Citation: Pike, R., Cheng, N.S., Cravens, K., Lamminmaki, D. (2005). Trade credit terms: Asymmetric information and price discrimination evidence from three continents. Journal of Business Finance and Accounting 32 (5-6) : 1197-1236. ScholarBank@NUS Repository.
Abstract: Trade credit terms offer firms contractual solutions to informational asymmetries between buyers arid sellers. The credit period permits buyers to reduce uncertainty concerning product quality prior to payment, while the seller can reduce uncertainty concerning buyer payment intentions by prescribing payment before/on delivery or through two-part payment terms and other mechanisms. Variation in trade credit terms also offers firms price discriminating opportunities. This study, drawing on the responses of 700 large firms in the US, UK and Australia, explores trade credit terms through the twin objectives of reducing information asymmetries and discriminatory pricing. Support is found for both theories. © Blackwcll Publishing Ltd. 2005.
Source Title: Journal of Business Finance and Accounting
ISSN: 0306686X
DOI: 10.1111/j.0306-686X.2005.00627.x
Appears in Collections:Staff Publications

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