The declining trend in trade credit ratios: The impact of firm‐specific and macro factors

2021 ◽  
Author(s):  
Ranjan D’Mello ◽  
Mark Gruskin ◽  
Francesca Toscano
Keyword(s):  
Trade Credit ◽  
The Impact

scholarly journals Trade credit, trade income elasticity and the international transmission of shocks

2021 ◽  
Author(s):  
Anna Watson
Keyword(s):  
International Trade ◽  
Open Economy ◽  
Trade Credit ◽  
Income Elasticity ◽  
Heterogeneous Firms ◽  
Firm Level ◽  
Macroeconomic Shocks ◽  
Cyclical Fluctuations ◽  
Irish Data ◽  
The Impact

AbstractThe paper examines the impact of trade credit on cyclical fluctuations in international trade. It provides new empirical evidence based on firm-level UK and Irish data showing that exporters use trade credit more actively and intensively than non-exporters. The study introduces inter-firm lending into an open economy general equilibrium model with heterogeneous firms and endogenous entry into the exports market. It demonstrates that trade credit amplifies the impact of macroeconomic shocks on international trade both along the intensive and extensive margins and that it significantly contributes to the high trade income elasticity observed in the data.

scholarly journals Relationship lending and the use of trade credit: the role of relational capital and private information

2021 ◽  
Author(s):  
Pierluigi Murro ◽  
Valentina Peruzzi
Keyword(s):  
Private Information ◽  
Business Models ◽  
Trade Credit ◽  
Banking Regulation ◽  
Manufacturing Firms ◽  
Soft Information ◽  
Relational Capital ◽  
Relationship Lending ◽  
The Impact ◽  
Italian Manufacturing Firms

AbstractUsing a unique sample of Italian manufacturing firms, we investigate the impact of relationship lending on firms’ use of trade credit. We find that firms maintaining close and long-lasting relationships with their main banks are associated with higher amounts of trade credit extended by suppliers. This result is robust to alternative measures of trade credit and relationship lending, and to different estimation techniques. We also analyze the mechanisms driving the association between relationship lending and the use of trade credit. Regression results suggest that the positive link between accounts payable and relationship lending is especially significant for firms that use to provide soft information to their lenders and for companies with greater relational abilities.Plain English Summary The existence of close and long lasting lending relationships positively affects the amount of trade credit manufacturing firms receive from their suppliers. By relying on the Survey on Italian Manufacturing Firms, we show that the positive link between relationship lending and the use of trade credit is driven by two channels: private information and relational capital. In a policy perspective, our findings reveal a need for banking regulation and supervision to encompass banking business models in evaluating banks. The current approach might not be suitable for local banks investing in soft information acquisition and could weaken SMEs’ chances to receive both bank financing and trade credit from suppliers. Moreover, from a managerial point of view, our results uncover the relevance of firms’ ability to create strong relationships with banks, suppliers, and other companies that may help alleviating financial constraints.

Accounts Receivable: Payable Impact on Each Other with Special Reference to Financial Performance—A Study of Small Cap Companies

2020 ◽  
Vol 47 (4) ◽  
pp. 362-373
Author(s):  
Sangeeta Mittal ◽  
Monika
Keyword(s):  
Financial Performance ◽  
Trade Credit ◽  
Unit Root Test ◽  
Effective Management ◽  
Manufacturing Companies ◽  
Causality Test ◽  
Accounts Receivable ◽  
Accounts Payable ◽  
The Impact ◽  
Test Correlation

Trade credit is important as a funding source for companies having a liquidity shortage. Trade credit comprises of both accounts receivable and payable. The financial literature has discussed the impact of accounts receivable or payable on a company’s financial performance. However, there is a lack of studies on the effects of accounts receivable and payable on each other and further its effect on the financial performance of small-cap companies. Financial performance is determined using the profitability and value of the company. The researchers examined the financial performance implications of offering and receiving trade credit for a sample of 193 BSE small-cap manufacturing companies in India during the period 2011–2019. Granger causality test, Levin, Lin and Chu Unit root test, correlation and regression have been used for data analysis. The finding suggested that accounts receivable influenced the use of accounts payable. The aftermath of accounts payables is that it negatively and significantly affected the profitability and had an insignificant relationship with the value of the company. The result implies that effective management of accounts receivable can influence the application of accounts payable that improves a company’s profits and value. The current study is useful for SMEs’ managers in determining the financial performance and capital structure.

scholarly journals The impact of the equity capital and trade credit financial sources on the company's performances sustainability

2020 ◽  
Vol 67 (3) ◽  
pp. 735-746
Author(s):  
Dragan Milošević ◽  
Jovanka Popović ◽  
Jelena Avakumović ◽  
Goran Kvrgić
Keyword(s):  
Trade Credit ◽  
Equity Capital ◽  
The Impact

Fuzzy-Based EOQ Model With Credit Financing and Backorders Under Human Learning

2021 ◽  
Vol 10 (4) ◽  
pp. 14-36
Author(s):  
Mahesh Kumar Jayaswal ◽  
Mandeep Mittal ◽  
Isha Sangal ◽  
Jayanti Tripathi
Keyword(s):  
Trade Credit ◽  
Planning Horizon ◽  
Human Learning ◽  
Lead Times ◽  
Credit Period ◽  
Eoq Model ◽  
Triangular Numbers ◽  
Credit Financing ◽  
Fuzzy Cost ◽  
The Impact

In this paper, an inventory model has been developed with trade credit financing and back orders under human learning. In this model, it is considered that the seller provides a credit period to his buyer to settle the account and the buyer accepts the credit period policy with certain terms and conditions. The impact of learning and credit financing on the size of the lot and the corresponding cost has been presented. For the development of the model, demand and lead times have been taken as the fuzzy triangular numbers are fuzzified, and then learning has been done in the fuzzy numbers. First of all, the consideration of constant fuzziness is relaxed, and then the concept of learning in fuzzy under credit financing is joined with the representation, assuming that the degree of fuzziness reduces over the planning horizon. Finally, the expected total fuzzy cost function is minimized with respect to order quantity and number of shipments under credit financing and learning effect. Lastly, sensitive analysis has been presented as a consequence of some numerical examples.

scholarly journals Impact of Economic Policy Uncertainty on Trade Credit Provision: The Role of Social Trust

2020 ◽  
Vol 12 (4) ◽  
pp. 1601 ◽  
Author(s):  
Peng Liu ◽  
Daxin Dong
Keyword(s):  
Economic Policy ◽  
Fixed Effects ◽  
Trade Credit ◽  
Social Trust ◽  
Alternative Measure ◽  
Policy Uncertainty ◽  
Firm Level ◽  
Economic Policy Uncertainty ◽  
The Impact

This paper explores the impact of economic policy uncertainty (EPU) on trade credit while taking into account the interactive role of social trust. The analysis is based on the panel data econometric model with fixed effects. Using firm-level data across 16 economies from 1995Q1 to 2015Q1, we find that (i) there exists a negative and highly significant relationship between economic policy uncertainty and the provision of trade credit; (ii) this relation is weaker for firms in countries with higher levels of social trust; and (iii) the effects of EPU and social trust are both more substantial for firms in more financially constrained industries. The impact of social trust is not a result of people’s high confidence in government, an effective legal system of enforcing contracts, a high-quality institutional system or an excellent system of protecting shareholders. Our result is robust if we exclude business cycle effects or use an alternative measure of financial constraints.

scholarly journals An Analysis of Proposed Framework on Impact of Working Capital Management on the Profitability of Selected Manufacturing Companies Listed on the Nigerian Stock Exchange

2012 ◽  
Vol 4 (12) ◽  
pp. 730-736 ◽  
Author(s):  
Yusuf Aminu
Keyword(s):  
Inventory Management ◽  
Business Strategy ◽  
Trade Credit ◽  
Stock Exchange ◽  
Optimal Level ◽  
Manufacturing Companies ◽  
Capital Management ◽  
Working Capital ◽  
Working Capital Management ◽  
The Impact

Working capital management encompasses the overall idea of management of current assets and current liabilities of a business. Whether empirical or conceptual, the discussion have delineated working capital management as that part of business strategy which involves effective management of short term or current assets and liabilities to ensure optimal level and maximization of value. This paper aims to provide an analysis on the concept and propose framework that emphasizes on investigating the impact of management of working capital on the profitability of manufacturing companies listed on the Nigerian stock exchange. The paper proposes four dimensions (variables) as cash management levels, inventory management levels, receivable management, and the trade credit (Accounts payable) as measures of working capital management and the profitability of companies.

scholarly journals Effect of Trade Credit on Firms Growth: A Case Study of Pakistani Non-financial Firms

2019 ◽  
Vol 5 (2) ◽  
Author(s):  
Hafiz M. Adnan Hanif
Keyword(s):  
Panel Data ◽  
Firm Growth ◽  
Trade Credit ◽  
Panel Data Analysis ◽  
Method Of Moment ◽  
Listed Firms ◽  
Financial Firms ◽  
Generalized Method Of Moment ◽  
The Impact

This study attempts to investigate the impact of trade credit on the growth of non-financial firms of Pakistan. Most of the businesses move from traditional business transactions to automated and sophisticated credit transaction methods. As large firms have better access to financial institutions and markets but still, they are interested to seek firm growth by adopting the trade credit policies. This study collects information from non-financial firms of Pakistan. Panel data is used to explore the impact of trade credit on firms growth. The data collect from the year 2001- 2015 of 257 non-financial firms of Pakistan. A technique of panel data analysis, generalized method of moment used to analyze the data. The results suggest that the trade credit and GDP have a positive significant impact on firms’ growth. Moreover, Firm’s age, its size and inflation in the economy have also impacted the firm’s growth but in negative direction. Finally, the non-financial listed firms of Pakistan can achieve their growth targets by adopting trade credit policies

Investor sentiment, market competition and trade credit supply

2019 ◽  
Vol 9 (2) ◽  
pp. 284-306
Author(s):  
Hongbin Huang ◽  
Ran Li ◽  
Ya Bai
Keyword(s):  
Trade Credit ◽  
Market Competition ◽  
Investor Sentiment ◽  
Real Economy ◽  
Content Type ◽  
The Real ◽  
Credit Supply ◽  
Virtual Economy ◽  
The Difference ◽  
The Impact

Purpose The purpose of this paper is to study the influence of investor sentiment on the supply of trade credit, and further explores the difference of the effect of investor sentiment on the supply of trade credit in the environment of strong market competition and weak market competition. Design/methodology/approach The authors use panel estimation techniques to examine the impact of investor sentiment in the Chinese securities market on the supply of corporate trade credit. Findings This paper finds that investor sentiment has positive impact on trade credit through three channels of motivation, willingness and ability. At the same time, this paper finds that investor sentiment has stronger impact on enterprises in strong market competition than enterprises in weak market competition. Research limitations/implications This paper expands the research on the influence of virtual economy on the real economy, analyzes the difference of the influence of investor sentiment on the supply of trade credit under different market competition conditions. Practical implications The paper perfects the mechanism of trade credit decision-making at this stage, and provides more evidence for the virtual economy to act on the real economy. Social implications This paper provides a theoretical basis for the government functional departments to use the investor sentiment to play a positive role in trade credit to improve the market competition and guide the development of China’s capital market in the direction of rationalization and health. Originality/value In combination with market competition environment and industry characteristics, this paper investigates external irrational factors and studies how investor sentiment affects trade credit supply.

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