Suppliers' listing status and trade credit provision

Abdulla, Yomna; Dang, Viet Anh; Khurshed, Arif

doi:10.1016/j.jcorpfin.2019.101535

Cited by 45 publications

(20 citation statements)

References 81 publications

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“…In the second-stage results (columns (2), (4), and ( 6)) in Table 3, the coefficients on most of the firm-specific determinants of trade receivables are statistically significant, except ROA, leverage, and idiosyncratic stock returns. Specifically, tangibility is negatively and significantly related to receivables to sales at the 1% level, consistent with prior evidence (e.g., Giannetti et al, 2011) and the substitution effect between investing in fixed assets and accounts receivable (Abdulla et al, 2020). The results regarding size show that smaller firms tend to offer more trade credit than large firms, consistent with El El Ghoul and Zheng (2016).…”

Section: Notesupporting

confidence: 87%

“…First, in terms of the relevance restriction, previous research shows that stock returns are significantly related to a firm's financing (e.g., Myers, 1977;Myers, 1984;Baker and Wurgler, 2002;Welch, 2004) and investment decisions (e.g., Lamont, 2000;Cooper et al, 2008;Liu et al, 2009;Titman et al, 2004). To the extent that trade credit is one of the most important sources of financing for customers (Brick and Fung, 1984;Petersen and Rajan, 1997;Mateut et al, 2006) as well as a relevant form of (short-term) investment for suppliers (e.g., Abdulla et al, 2020), it should be highly correlated with stock returns. Empirically, previous evidence indeed documents a strong association between trade credit and stock returns (Hill et al, 2012;Goto et al, 2015;Albuquerque et al, 2013).…”

Section: Instrumental Variable and 2sls Regressionsmentioning

confidence: 99%

“…that access to external financial markets is an important determinant of a firm's trade credit provision (e.g., Petersen and Rajan, 1997;Giannetti et al, 2011;Abdulla et al, 2020). However, there are contradicting views regarding the impact of financial constraints on trade receivables and, particularly, the strength of peer influence on this policy.…”

Section: Notementioning

confidence: 99%

“…First, our study adds to existing research on the determinants of trade receivables. Previous studies have documented a number of firm characteristics that affect trade credit policy (e.g., Mian and Smith, 1992;Long et al, 1993;Petersen and Rajan, 1997;Ng et al, 1999;Molina and Preve, 2009;Giannetti et al, 2011;Abdulla et al, 2020). 3 We add to this strand of research by showing that a firm's trade credit is not only determined by internal firm-specific factors but is also affected by the environment in which the firm operates, particularly the trade credit policies of industry peers.…”

Section: Introductionmentioning

confidence: 98%

See 3 more Smart Citations

Is There Mimicking Behavior in Firms’ Trade Credit Decisions?

Rind

Boubaker

Dang

2021

RCF

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This paper investigates whether peer firms affect trade credit policy. Using data on US listed firms for the period 1997-2015, we document strong evidence of peer influence on trade credit provision. This result remains significant after using alternative trade credit measures, different peer proxies, and addressing endogeneity concerns using an instrumental variable approach based on the stock price shocks of industry peers. Our cross-sectional analysis further shows that peer effects in trade receivables only exist among suppliers that face fierce product market competition, consistent with the notion that firms closely mimic their peers due to competitive pressure. There is, however, mixed, and weak evidence on the argument that peer mimicking is driven by learning and reputational motives. Overall, our study highlights the important role of peer firm behavior in shaping a firm's trade credit policy.

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Section: Notesupporting

confidence: 87%

Section: Instrumental Variable and 2sls Regressionsmentioning

confidence: 99%

Section: Notementioning

confidence: 99%

Section: Introductionmentioning

confidence: 98%

See 2 more Smart Citations

Is There Mimicking Behavior in Firms’ Trade Credit Decisions?

Rind

Boubaker

Dang

2021

RCF

Self Cite

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“…Using the data of public and private firms, Abdulla et al. (2020) show that stock market listing significantly influences trade credit provision. Similarly, Altunok et al.…”

Section: Literature Reviewmentioning

confidence: 99%

Decision making in trade credit financing: impact of loss aversion and power imbalance

Jin

Zhang

2020

Int Trans Operational Res

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We incorporate loss aversion and power imbalance into a trade credit contract that sets both wholesale price and payment ratio at ordering time. Our models are based on a dyadic supply chain consisting of a loss‐averse supplier and a capital‐constrained retailer who can get finance via bank credit or trade credit. We derive the optimal trade credit contract under the retailer‐dominant noncooperative (RDN) and the supplier‐dominant noncooperative (SDN) games. Our results show that the impact of the supplier's loss aversion depends on whether the supplier dominates the supply chain. Specifically, under RDN scenario, a single bank credit should be adopted by the retailer, irrespective of the supplier's loss aversion. Under SDN scenario, however, a hybrid of bank credit and trade credit should be provided to the retailer when the supplier's loss aversion level exceeds a critical threshold value, and a single trade credit should be granted otherwise. Moreover, we find that the capital‐constrained retailer may benefit from the supplier's loss aversion behavior. Finally, we conduct a serial of numerical examples to develop more managerial insights.

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Why do firms extend trade credit? The role of inventories

Fernandes,

Guariglia,

Kontonikas

et al. 2024

Int. J Fin Econ

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We are the first to explore the role of inventories as a trade credit driver in an economic/financial crisis setting. To this end, we make use of a panel of 198,024 manufacturing firms from eleven euro‐area countries over the period 2006–2022. We find an inverse relationship between the stock of inventories and trade credit extended, which is magnified during the recent sovereign debt crisis. These results are robust to using different definitions of trade credit extended and of the crisis. Furthermore, we find that the association between inventories and trade credit extended is driven by financially constrained firms and firms producing differentiated products.

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Suppliers' listing status and trade credit provision

Cited by 45 publications

References 81 publications

Is There Mimicking Behavior in Firms’ Trade Credit Decisions?

Is There Mimicking Behavior in Firms’ Trade Credit Decisions?

Decision making in trade credit financing: impact of loss aversion and power imbalance

Why do firms extend trade credit? The role of inventories

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