タイトル:Does SME policy enhance the adjustment of trade credit? Evidence from a revision of the Subcontract Act in Japan
In this paper, we examine whether small and medium enterprises (SMEs) face severe constraints in adjusting trade receivables by focusing on the 2016 revision of the Subcontract Act of Japan. In theory, small businesses have weaker bargaining power than their customers because they account for only a small share of sales and are likely to depend on certain customers. Accordingly, many small businesses can face severe constraints in the adjustment of their trade receivables, and as a result, the amount of trade receivables can be excessive for some. The Subcontract Actprohibits customer firms from receiving trade credit from small businesses over the long term, and this was enforced more strictly after 2016 following a regulatory revision. This made it easier for small businesses to adjust their trade receivables if their level was excessive, serving to enhance the speed of their adjustment. However, our results show that small businesses could more rapidly adjust their trade receivables than large firms, both before and after the revision. For this reason, we conclude that constraints on the adjustment of trade receivables do not matter for small businesses.


Keywords:small businesses, trade credit, small and medium enterprise policy,partial adjuster model
JEL classification:G32; L14; L53