The relation between working capital management and corporate profitablity is investigated for a sample of 1,009 large Belgian non-financial firms for the 1992-1996 period. Trade credit policy and inventory policy are measured by number of days accounts receivable, accounts payable and inventories, and the cash conversion cycle is used as a comprehensice measure of working capital management. The results suggest that managers can increase corporate profitablity by reducing the number of days accounts receivable and inventories. Less profitable firms wait longer to pay their bills. Copyright Blackwell Publishers Ltd 2003.

JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact support@jstor.org.. Wiley and Financial Management Association International are collaborating with JSTOR to digitize, preserve and extend access to Financial Management. Long, Malitz, and Ravid (1993) proposed a model based on the idea that the major purpose of trade credit is to allow buyers to assess the quality of the firm's products before paying. In this paper, we apply a similar methodology not only using a sample of industrial firms, but also a sample of Belgian wholesale distribution firms. Furthermore, we develop and test two additional hypotheses, based on the observation that industrial and financial groupings play an important role in the Belgian economy. While our results partially confirm the four hypotheses of Long et al., we find evidence that a firm selling to a linked customer extends trade credit for reasons other than assessing product quality. We find that when a firm has a shortage of cash, investment in accounts receivable from linked firms is reduced. An excess of cash does not seem to influence trade credit policy. 0 Most firms have an important amount of cash invested in accounts receivable. Trade credit is also a major source of financing through accounts payable. There have been several sorts of explanations proposed for trade credit. Finance-based models (e.g. Schwartz, 1974) argue that firms able to obtain funds at a low cost will offer trade credit to firms facing higher financing costs. Tax-based models (e.g. Brick and Fung, 1984) see trade credit as arbitraging tax differences between buyers and sellers. Liquiditybased models (e.g. Emery, 1984) see trade credit as a more profitable short-term investment than marketable securities. Operational models (e.g. Emery, 1987) stress its role in smoothing demand. Recently, Scherr (1996) examined optimal limits for trade credit.Recently, Long, Malitz, and Ravid (1993), inspired by Smith (1987), argued that trade credit allows customers to assess product quality before paying. Similar models have been developed by Lee and Stowe (1993) and Emery and Nayar (1994). The Long et al. model is our starting point. After setting out its main ideas and hypotheses, we test it by using two samples: 393 Belgian industrial firms and 288 Belgian wholesale distribution firms. The results partially confirm the predictions of the model.We then extend the model to take into account other financial connections among firms using trade credit. For the last 150 years, industrial and financial groupings and combines have played an important role in the Belgian economy. Holding companies seem to substitute for poorly developed Belgian capital markets, in order to organize the flows of funds between group members. Trade credit is one dimension in a com...

In this article the authors study the impact of a family business transfer on the financial structure and performance based on a sample of 152 small-to medium-sized businesses. The aim is to identify the effects of a succession by relying on panel data gathered over the period 1991 to 2006 resulting in more than 2,000 firm-year observations. The main findings are that a transfer from the first to the second generation negatively influences the debt rate of the company, whereas in successions between later generations this effect is reversed. With respect to firm growth, analyses indicate that in first-generation companies the growth rate decreases after the transition, whereas in nextgeneration firms no effect on the growth level can be identified. Finally, no evidence is found that a family firm's profitability is affected by succession, which shows that a transfer should not necessarily be seen as a negative event in the life cycle of a family business.

debt maturity, capital structure, small firms, privately held firms, G32,

Using a large sample of multinational corporations (MNCs), we examine the location of earnings management within the firm. We posit and find that MNCs manage their consolidated earnings through an orchestrated reporting strategy across subsidiaries over which they exert significant influence. Specifically, we find that headquarters' influence on subsidiary earnings management increases with the degree of subsidiary integration and the extent of earnings management opportunities. Most importantly, we provide evidence that MNCs exploit regulatory arbitrage opportunities arising from cross-country differences in institutional quality. We document that, in response to exogenous improvements in the quality of their home-country institutions, MNCs rebalance their reporting strategies by clustering earnings management in subsidiaries from countries with more lenient regulations. Taken together, our findings yield important insights on the drivers of earnings management location within the firm and highlight the need for better cross-country coordination in regulatory design. JEL Classifications: F23; G15; G34; G38; M41; M48.