Data collected about Trade Credit Policy in Brazil (considering just SMEs). Our hypothesis are basically the following:
Solving uncertainties for the buyer:
H1: Companies that sell high quality, technology-based products give longer credit periods to allow the quality of the products to be checked before any actual payment is made.
H2: Selling companies with less reputation give longer credit periods, when reputation is measured by way of metrics involving customer size and concentration.
H3: Selling companies that have a high proportion of their external sales on credit give longer credit periods.
H4: Selling companies that operate in highly seasonal markets give longer credit periods.
Solving uncertainties for the seller:
H5: Using cash-on-delivery (CoD) or cash-before-delivery (CbD) payment conditions is more common when the seller: (a) is smaller; (b) sells mainly to end users; and (c) has a larger proportion of foreign sales on credit.
H6: The use of two instalment terms is associated with: (a) fewer days delay; and (b) selling mainly to smaller customers.
Regarding price discrimination and trade credit policy, therefore, the following hypotheses are tested:
H7a: The actual rate of interest on the immediate payment discount is positively associated with:
i) the size of the selling company;
ii) being one of the main players in the market;
iii) adopting sales maximization (instead of risk reduction) as the main objective of credit;
iv) customer concentration;
v) negotiations with large customers;
vi) negotiations mainly with wholesale buyers.
H7b: The actual interest rate on immediate payment discount is negatively associated with:
i) negotiations, mainly with the end user;
ii) the proportion of foreign sales on credit.