Trade Credit and the Effect of Macro-Financial Shocks: Evidence from U.S. Panel Data

AbstractUsing disaggregated panel data, we examine how firms change trade credit in response to a monetary tightening. We find that both accounts payable and accounts receivable increase with tighter monetary policy, implying that trade credit helps firms absorb the effect of a credit contraction. Further, both S&P 500 firms and a comparison group of smaller firms increase net trade credit (accounts receivable minus payable), making up for the reduced liquidity associated with tighter policy. However, we find no evidence that large firms play this role more actively than smaller firms.

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

SEDME (Small Enterprises Development Management & Extension Journal) ◽

10.1177/09708464211055532 ◽

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.

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Trade Credit and the Effect of Macro-Financial Shocks: Evidence From U.S. Panel Data

IMF Working Papers ◽

10.5089/9781451855005.001 ◽

2003 ◽

Vol 03 (127) ◽

pp. 1 ◽

Cited By ~ 3

Author(s):

Yungsan Kim ◽

Woon Gyu Choi ◽

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Keyword(s):

Panel Data ◽

Trade Credit ◽

Financial Shocks

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Effect of Working Capital on Profitability of Selected Quoted Firms in Nigeria

Global Business Review ◽

10.1177/097215091201300301 ◽

2012 ◽

Vol 13 (3) ◽

pp. 367-381 ◽

Cited By ~ 10

Author(s):

Olayinka Olufisayo Akinlo

Keyword(s):

Trade Credit ◽

Capital Management ◽

Working Capital ◽

Credit Policy ◽

Inventory Policy ◽

Working Capital Management ◽

Accounts Receivable ◽

Financial Firms ◽

Cash Conversion Cycle ◽

Accounts Payable

The article examines the relation between working capital management and profitability for a sample of 66 Nigerian non-financial firms for the period 1997–2007. Trade credit policy and inventory policy are measured by number of days accounts receivable, accounts payable and inventories; and the cash conversion cycle (CCC) is used as a comprehensive measure of working capital management. The results suggest that firm’s profitability is reduced by lengthening the number of days accounts receivable, number of days of inventory and number of days accounts payable. The result shows that shortening the CCC improves the profitability of the firms.

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A Close Look Into Supplier Policy Changes in Response to Their Buyers’ Financial Stress

Studies in Business and Economics ◽

10.2478/sbe-2019-0001 ◽

2019 ◽

Vol 14 (1) ◽

pp. 5-16

Author(s):

Jamol Abdiev ◽

Gurkan Akalin

Keyword(s):

Empirical Study ◽

Policy Change ◽

Trade Credit ◽

Financial Stress ◽

Policy Changes ◽

Accounts Receivable ◽

Payment Policy ◽

Accounts Payable ◽

Inventory Turnover ◽

The Subject

AbstractTrade credit, the credit extended to buyers by suppliers who let them buy now and pay later, is an important financing method for many buyers. Any policy change by buyers in accounts payable, a measure for trade credit, results in appreciation or frustration on the supplier side. Even though, such effects have been well documented in the literature, an empirical study on the subject is surprisingly lacking. As an example, a certain buyer might change the payment policy by extending or shortening the periods of the payments. We investigate how and if the payment policy change of the buyer affects the supplier’s operations, especially on the perspective of inventory of suppliers. This study further investigates how changes in a firm’s accounts payable days and accounts receivable days affect its inventory turnover days.

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