Resumen
Credit from suppliers is an important source of finance for firms. It can sustain firms? financial flexibility even in periods of downturn. In this study, using a large database of 90,763 Italian firms in the 2015?2021 period, we investigated how local financial development affects the trade-credit policies of SMEs and how this effect is conditioned by the degree of judicial enforcement. Given that trade credit can be a substitute for bank financing, we find that firms make more use of trade credit in developed financial markets. Moreover, we highlight the finding that a higher degree of judicial enforcement, which reinforces the role of contracts in the market, amplifies this effect. Finally, we observe that the COVID-19 crisis has reduced both the positive effect of local financial development and the positive moderating effect of enforcement in the use of trade credit.