Management Buy-outs and Venture Capital
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Management Buy-outs and Venture Capital

Into the Next Millennium

Edited by Mike Wright and Ken Robbie

This book presents up-to-date evidence on the issues facing financiers and intermediaries involved in venture capital and management buy-outs. It provides a comprehensive review of existing literature and an analysis of international trends in market development as well as a global comparison of the major issues.
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Chapter 8: Small business demand for trade credit, credit rationing and the late payment of commercial debt: an empirical study*

Nicholas Wilson, Carole Singleton and Barbara Summers


Page 181 8.  Small business demand for trade credit, credit rationing and the late payment of commercial  debt: an empirical study* Nicholas Wilson, Carole Singleton and Barbara Summers Introduction In recent years a considerable amount of research has been devoted to understanding the functioning of credit markets, credit market imperfections, the phenomenon of  credit rationing and the role of asymmetric information (Stiglitz and Weiss, 1981; de Meza and Webb, 1987). One strand of this debate has focused on the impact of  finance (debt)­gaps, under asymmetric information, on the dynamics of small firm survival and growth (Black, de Meza and Jeffreys, 1996; Cressy, 1996). The  provision of debt to small firms is widely recognised as a key factor in enabling (potentially) successful small firms to start­up and grow and inter alia in improving the  dynamic efficiency of the economy. Indeed concerns about a ‘finance­gap’ and the terms on which debt finance is available to smaller companies have led successive  policy makers in the UK and abroad to launch many initiatives in an attempt to alleviate the perceived problem. Yet survey evidence suggests that small companies are  often under­capitalised and consequently highly reliant on short­term finance (for example, bank overdraft), a factor that has been widely cited as a main contributor to  constraining growth, cash­flow problems and premature business failure (see Bickers, 1994). Trade credit, sellers accepting payment after the delivery of goods and services, plays an important role as a component of net working capital...

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