Trade Credit and Imperfect Enforcement
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Trade credit is an important financial mechanism and has recently received a considerable degree of attention in the academic literature (see, for example, McMillan and Woodruff, 1999). It is difficult to supply trade credit, however, if payment cannot be enforced effectively. Thus, the importance of informal enforcement mechanisms or relational contracting has been stressed (McMillan and Woodruff, 1999). It is crucially important to determine whether or not informal enforcement mechanisms are working well in sustaining trade credit in each developing and transition economy.
KeywordsTrade Volume Informal Sector Trade Credit Enforcement Mechanism Relational Contracting
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