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Net trade credit: what are the determinants?

Net trade credit: what are the determinants? PurposeThe purpose of this paper is to extend the literature on trade receivables and trade payables by examining the determinants of net trade credit.Design/methodology/approachTo do that, a sample of 67,047 firms in the UK with 443,190 firm year observations is used.FindingsThe results are robust to unobserved heterogeneity and industry effects. The evidence suggests that firms with more inventories, market share and are financially distressed invest less in trade credit. Moreover, higher operating cash flow, annual sales growth, export propensity, access to bank credit and larger firms lead to higher investment in trade credit.Originality/valueAdditionally, the paper broadens the scope of the literature by analysing the determinants of net trade credit around the financial crisis and industry competitiveness. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png International Journal of Managerial Finance Emerald Publishing

Net trade credit: what are the determinants?

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Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
1743-9132
DOI
10.1108/IJMF-12-2015-0222
Publisher site
See Article on Publisher Site

Abstract

PurposeThe purpose of this paper is to extend the literature on trade receivables and trade payables by examining the determinants of net trade credit.Design/methodology/approachTo do that, a sample of 67,047 firms in the UK with 443,190 firm year observations is used.FindingsThe results are robust to unobserved heterogeneity and industry effects. The evidence suggests that firms with more inventories, market share and are financially distressed invest less in trade credit. Moreover, higher operating cash flow, annual sales growth, export propensity, access to bank credit and larger firms lead to higher investment in trade credit.Originality/valueAdditionally, the paper broadens the scope of the literature by analysing the determinants of net trade credit around the financial crisis and industry competitiveness.

Journal

International Journal of Managerial FinanceEmerald Publishing

Published: Jun 5, 2017

References