scholarly journals Why do firms invest in accounts receivable? An empirical investigation of the Malaysian manufacturing sector

2018 ◽  
Vol 8 (2) ◽  
pp. 166-184 ◽  
Author(s):  
Salima Yassia Paul ◽  
Cherif Guermat ◽  
Susela Devi
Keyword(s):  
Trade Credit ◽  
Manufacturing Sector ◽  
Manufacturing Firms ◽  
Sales Growth ◽  
Short Term ◽  
Policy Makers ◽  
Content Type ◽  
Accounts Receivable ◽  
Developed Economies ◽  
Gross Margins

Purpose The purpose of this paper is to investigate the factors that influence Malaysian manufacturing sector investment in accounts receivable (AR), an asset seen by many as one of the riskiest in any company’s balance sheet. Design/methodology/approach The authors test several theories, related to AR, using a cross-section of 262 listed manufacturing firms over a period of five years (2007-2011). Both fixed and random effect approaches are adopted to deal with potential heterogeneity across firms. Findings The results show that investment in AR in Malaysia are influenced by firm size, short-term finance, sales growth and collateral. Profit, liquidity and gross margins have no role in affecting the decision of trade credit granting to customers. The results are inconsistent with previous studies. Size and short-term finance have a negative, rather than positive, impact. Liquidity and gross margins have no, rather than positive, effect. While profit and sales growth are predicted to feature a U-shaped relationship with investment in AR, the former is insignificant while the latter is strictly increasing. The only factor found to be consistent with prior studies is collateral. Research limitations/implications The results have two principal implications. First, policy makers should not take a holistic view of the trade credit market. Given that policy makers aim to improve liquidity and trade, they should design policies that are not only country specific but also sector specific. As is clear from our results, what holds for other countries or sectors may not necessarily be true for the Malaysian manufacturing sector. This has important implications for policy makers in emerging economies. Practical implications Investment in AR, in the Malaysian manufacturing sector, is impacted by many of the factors implied by either theory or empirical evidence. However, the main finding in this paper is that the Malaysian manufacturing sector is rather different. First, while liquidity and gross margin have been found to have a positive and significant effect on AR helping hand theory in prior studies, the results show that these two factors play no role in influencing the level of AR in the Malaysian manufacturing sector. Social implications Unlike the experience in developed economies, firms in our sample that have access to short-term finance are less likely to grant trade credit. This suggests that the helping hand theory does not hold as far as the Malaysian manufacturing firms are concerned: firm that have better access to short-term finance in Malaysia do not use trade credit to pass on the benefit to their customers by granting them trade credit. Originality/value It is unclear why firms invest in AR given the high risks of uncollectability as well as tedious, time-consuming and costly legal process for debt recovery compared to firms from more developed economies. This paper examines the reasons business-to-business lending, through AR, is widespread in Malaysia and investigates the factors that affect this decision despite the risk involved. To our knowledge, this is the first study to date that looks at the factors that influence AR level in the Malaysian manufacturing sector.

The impact of credit supply on sales growth: Swedish evidence

2015 ◽  
Vol 11 (3) ◽  
pp. 329-340 ◽  
Author(s):  
Darush Yazdanfar ◽  
Peter Öhman
Keyword(s):  
Firm Growth ◽  
Trade Credit ◽  
Least Square ◽  
Set Covering ◽  
Sales Growth ◽  
Data Set ◽  
Content Type ◽  
Accounts Receivable ◽  
Credit Supply ◽  
The Impact

Purpose – The purpose of this paper is to empirically investigate the impact of credit supply on sales growth among small- and medium-sized enterprises (SMEs). Design/methodology/approach – The three-stage least square (3SLS) method was used to analyse a cross-sectional panel data set covering 13,548 Swedish SMEs across four industry sectors from 2009 to 2012. Findings – The study provides empirical evidence that trade credit in terms of accounts receivable significantly and positively affects sales growth, indicating that SMEs investing more in accounts receivable are more likely to achieve growth. Furthermore, lagged sales growth and firm size are positively, while firm age is negatively, related to growth. Practical implications – Managers can increase firm growth by efficiently managing the supply of credit to their customers, especially liquidity-constrained firms, thereby increasing sales growth. Originality/value – To the authors’ best knowledge, this is one of the first empirical studies of the impact of credit supply in terms of accounts receivable on sales growth. The study applies the 3SLS method to a comprehensive cross-sectoral sample.

Supply chain capabilities and competitiveness of high-tech manufacturing start-ups in India

2019 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Debabrata Ghosh ◽  
Peeyush Mehta ◽  
Balram Avittathur
Keyword(s):  
Supply Chain ◽  
Emerging Economies ◽  
Manufacturing Sector ◽  
Manufacturing Firms ◽  
High Tech ◽  
Structured Interviews ◽  
Policy Makers ◽  
Content Type ◽  
Quality Material ◽  
Start Ups

Purpose The purpose of this paper is to understand the practices and policies unique to high-tech manufacturing start-ups in emerging economies, such as India. The study analyzes the main features and challenges of the high-tech manufacturing sector, and the way in which enabling environment including policy making, supply chain capability and related technologies through Industry 4.0 could be leveraged to foster growth. Design/methodology/approach The paper undertakes an exploratory approach through in-depth semi-structured interviews conducted with high-tech manufacturing firms in various stages of their growth. The paper provides evidence of the challenges that high-tech manufacturing firms face in India, the strategies they adopt and highlights the role of institutional structures and policies. Findings Findings show that high-tech manufacturing start-ups in India face various challenges in the upstream, production and downstream supply chain processes. Further, issues related to availability of quality material, quality suppliers, contracts, funding and access to markets remain. Results also show that enabling operational and financial levers could be created by policy makers and other stakeholders to help the high-tech manufacturing start-ups scale faster and create value. Originality/value This paper contributes to the R&D intensive industry and high-tech manufacturing literature in the context of emerging economies, such as India, and provides a rigorous overview of the start-up ecosystem in high-tech manufacturing.

“Small town” entrepreneurial ecosystems

2017 ◽  
Vol 9 (3) ◽  
pp. 238-262 ◽  
Author(s):  
Philip T. Roundy
Keyword(s):  
Economic Development ◽  
Small Town ◽  
Small Towns ◽  
Urban Centers ◽  
Small Cities ◽  
Policy Makers ◽  
Content Type ◽  
Developed Economies ◽  
Entrepreneurial Ecosystems ◽  
Economic Landscape

Purpose Entrepreneurial ecosystems are receiving growing attention from scholars, practitioners and policy-makers in both developed and developing countries. Studies of this phenomenon have focused almost exclusively on ecosystems in large, urbanized regions and metropolitan areas, located primarily in developed economies. However, the prevalence of small cities across the globe and the increasing acknowledgment that entrepreneurship in small towns is a key determinant of their economic development and rejuvenation suggests that entrepreneurial ecosystems research would benefit from a broader lens of inquiry. Thus, the purpose of this paper is to introduce a framework for studying entrepreneurial ecosystems in small towns. Design/methodology/approach This conceptual paper introduces the concept of small town entrepreneurial ecosystems (STEEs), draws from a wide-ranging set of disciplines to delineate the ways in which small town ecosystems are similar to and different than their larger counterparts and theorizes about several strategies STEEs use to overcome their limitations. Findings It is theorized that entrepreneurship in small cities is best conceptualized as the outcome of an ecosystem, which means that although small towns may not have some of the same key components as entrepreneurial ecosystems in large urban centers, other elements of the ecosystem may be able to bolster these deficiencies. It also suggests that those attempting to create or develop small town ecosystems may need to be entrepreneurial in the way they attract, view and utilize resources. Finally, it is theorized that small cities may be able to engage in several strategies to overcome their limitations and create vibrant entrepreneurial communities. Originality/value The theory developed produces implications for scholars focused on entrepreneurial ecosystems, economic development and emerging economies and suggests practical implications for policy-makers and development organizations seeking to improve the economic landscape of small cities.

Intangible assets and trade credit policy

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Sarah Taylor Hartsema ◽  
Chris Harris ◽  
Zhe Li ◽  
Thibaut G. Morillon
Keyword(s):  
Trade Credit ◽  
Intangible Assets ◽  
Negative Relationship ◽  
Intangible Asset ◽  
Financial Constraint ◽  
Sales Growth ◽  
Credit Policy ◽  
Content Type ◽  
The Relationship ◽  
Practical Implications

PurposeThe purpose of this paper is to identify whether the rise in intangible asset investment is related to trade credit investment and whether this relationship is driven by financial constraint and other firm factors.Design/methodology/approachThe study conducts fixed effect regressions testing the relationship between trade credit investment and intangible asset levels. The relationship is further examined for all firms based on product type, financial constraint and sales growth.FindingsThere is a negative relationship between investment in trade credit and the level of intangible assets as a proportion of total assets. This negative relationship is largely explained by firms in industries that traditionally utilize more trade credit, firms with financial constraints and firms with low sales growth.Practical implicationsThe level of investment in intangible assets continues to rise, while investment in trade credit is declining. This paper is the first to identify whether these trends could be related and to provide some explanation why.Originality/valueThis study is the first to link investment in trade credit with investment in intangible assets. There is a negative relationship that is most pronounced for firms that typically offer more trade credit, that are experiencing financial constraint and that are experiencing low growth.

scholarly journals Institutional incentives and pressures in Chinese manufacturing firms’ innovation

2019 ◽  
Vol 58 (5) ◽  
pp. 812-827
Author(s):  
Yongli Tang ◽  
Xinyue Hu ◽  
Claudio Petti ◽  
Matthias Thürer
Keyword(s):  
Systems Approach ◽  
Interaction Effects ◽  
Manufacturing Firms ◽  
Pressure Effects ◽  
Institutional Pressures ◽  
Policy Makers ◽  
Content Type ◽  
Institutional Incentives ◽  
Institutional Forces ◽  
Innovation Policies

Purpose The purpose of this paper is to investigate how Chinese firms’ innovation is related to their perceived incentives and pressures from the transitioning institutional environment. Design/methodology/approach A sample of 166 manufacturing firms located in Guangdong Province (China) is analyzed using binomial and moderated multiple regression models. Findings The results show that institutional incentives are more effective in promoting incremental innovations than radical ones, whereas institutional pressures are more pronounced in facilitating radical innovations than incremental ones. In addition, the interaction between the two divergent institutional forces is negatively related to innovation performance. Practical implications The findings inform managers and policy makers in institutional transition environments to consider and balance the effects of institutional forces. Firms should match the institutional incentives and pressures with their own innovation objectives in terms of incremental or radical goals, and take caution to deal with the divergent institutional directions, so as to avoid the negative interaction effects. Policy makers should take a systems approach when considering the incentive-based and/or command-and-control designs of innovation policies and regulations. Originality/value The study contributes to existing literature on institutions and innovation by disentangling incentive and pressure effects of institutions, regulation and innovation policies, as well as the combined and interaction effects intrinsic within institutional mixes.

Development of an integrated framework of LGSS strategies for Indian manufacturing firms to improve business performance: an empirical study

2020 ◽  
Vol 33 (1) ◽  
pp. 257-291 ◽  
Author(s):  
Lokpriya Gaikwad ◽  
Vivek Sunnapwar
Keyword(s):  
Six Sigma ◽  
Positive Impact ◽  
Manufacturing Sector ◽  
Manufacturing Firms ◽  
Manufacturing Industries ◽  
Environmental Benefits ◽  
Future Research ◽  
Continuous Growth ◽  
Content Type ◽  
Indian Industries

PurposeThis article aims to explore synergies between Lean, Green and Six Sigma practices in order to propose an integrated LGSS framework for continuous and incremental improvement in the Indian manufacturing industries. The three-dimensional LGSS framework seeks to provide various combinations and support operational, financial, environmental and social needs.Design/methodology/approachIn the research method, first, the current problems faced by Indian manufacturing industries are considered and proposition of a conceptual framework that qualitatively integrates synergistic aspects of Lean, Green and Six Sigma practices, and second, the framework is checked by a survey taken from 203 Indian firms by using SPSS-AMOS.FindingsThe hypothesized result suggests that the positive impact of integrated practices on firm performance in terms of operational, financial, social and environmental outcomes. It also provides a systemic and holistic approach to problem-solving through constant and incremental enhancement in the manufacturing sector.Research limitations/implicationsIn this research, only Indian manufacturing industries have been studied but can be extending into different geographical areas and sectors. Future research is also possible for different behavior and characteristics of companies that can lead to recommending strategies on how companies can improve performance. Most importantly, future research can try to understand which specific practice can contribute to competitive advantage and business success.Practical implicationsManufacturing firms that want to improve environmental sustainability should implement integrated LGSS practices into their supply chain. The set of combined practices improves operational, social, economical and environmental benefits.Social implicationsThe research presents an integrated approach of LSS for the manufacturing industry which leads their business processes to achieve economic sustainability through continuous growth and improved operational efficiency. Manufacturing industries result in outcomes like reduced cost, lead time, improved quality, sustainable market position, profitability, customer satisfaction, etc.Originality/valueThis research is different from previous studies because it integrates Lean, Green and Six Sigma practices into a unique framework that fulfills a specific need of the Indian manufacturing sector that guides operational, social, environmental and financial issues in Indian industries.

scholarly journals Substitute or complement? The use of trade credit as a financing source among SMEs

2017 ◽  
Vol 40 (1) ◽  
pp. 10-27 ◽  
Author(s):  
Darush Yazdanfar ◽  
Peter Öhman
Keyword(s):  
Fixed Effects ◽  
Trade Credit ◽  
Generalized Method Of Moments ◽  
Short Term ◽  
Content Type ◽  
System Models ◽  
Accounts Payable ◽  
Short And Long Term ◽  
Retained Earnings

Purpose This study aims to investigate trade credit as a financing source among small- and medium-sized enterprises (SMEs), particularly the influence of short-term debt, long-term debt and profitability on the use of such credit. Design/methodology/approach Ordinary least squares (OLS), fixed-effects and generalized method of moments (GMM) system models were used to analyze a large cross-sectional panel data set of 15,897 Swedish SMEs in five industry sectors for the 2009-2012 period. Findings The study provides empirical evidence that long-term debt and profitability each significantly and negatively influence trade credit (i.e. accounts payable) and that short-term debt positively influences trade credit. Notably, while trade credit seems to complement other short-term debt, it replaces long-term debt. Moreover, firm size in terms of sales is positively related and firm age is negatively related to accounts payable. Industry affiliation is another significant explanatory variable. Practical implications The results provide debt holders, potential investors, policymakers and academic researchers with insights into the relationship between trade credit demand, on the one hand, and external financing (i.e. short- and long-term debt) and internal retained earnings (i.e. profit), on the other. From a manager’s perspective, the findings may be important for decision-making regarding trade credit use. Originality/value When investigating trade credit determinants, the literature has seldom distinguished between short- and long-term debt and considered that they may influence the use of trade credit in different ways. The present study adds to the literature by using OLS, fixed-effects and GMM system models to analyze a large cross-sectoral sample in a high-tax country where both bank loans and trade credit are considered important financing instruments.

scholarly journals Strategic orientation of servitization in manufacturing firms and its impacts on firm performance

2019 ◽  
Vol 119 (2) ◽  
pp. 292-316 ◽  
Author(s):  
Yong Lin ◽  
Jing Luo ◽  
Petros Ieromonachou ◽  
Ke Rong ◽  
Lin Huang
Keyword(s):  
Firm Performance ◽  
Customer Service ◽  
Online Survey ◽  
Manufacturing Sector ◽  
Manufacturing Firms ◽  
Strategic Orientation ◽  
Content Type ◽  
Strategic Fit ◽  
Strategic Orientations ◽  
The Impact

Purpose The purpose of this paper is to provide implementation insights and implications regarding the strategic orientations of servitization by testing its impacts on firm performance, including financial performance and customer service performance. Design/methodology/approach Empirical research is conducted using an online survey disseminated to manufacturing firms in Southeast China. This research develops and verifies a strategic fit framework to understand the relationship between the strategic orientation of servitization and service innovation (SI), and its resulting impacts on firm performance. Findings The results show that service orientation (SO) has direct positive impacts on firm performance in the manufacturing sector. Customer orientation (CO) and learning orientation (LO) have no direct impact on firm performance, although they have indirect impacts on it via the mediating role of SI capability. Moreover, SO has a similar indirect impact on firm performance via SI capability. Research limitations/implications The survey focuses only on China; future studies should verify whether different cultural backgrounds impact the research results. Practical implications The results suggest that firms should build up three strategic orientations (SO, CO and LO) for implementing servitization to facilitate SI capability and, thus, to improve firm performance. Originality/value This research contributes to enhancing the theory of servitization by developing a strategic fit model of servitization and revealing the impact mechanism of servitization in the manufacturing sector.

Firm, industry, and country level determinants of capital structure: evidence from Pakistan

2016 ◽  
Vol 5 (3) ◽  
pp. 362-384 ◽  
Author(s):  
Tanveer Ahsan ◽  
Man Wang ◽  
Muhammad Azeem Qureshi
Keyword(s):  
Corporate Governance ◽  
Capital Structure ◽  
Economic Conditions ◽  
Governance Mechanism ◽  
Short Term ◽  
Policy Makers ◽  
Content Type ◽  
Financial Firms ◽  
Country Level ◽  
Corporate Governance Mechanism

Purpose The purpose of this paper is to find out firm, industry, and country level determinants of capital structure of Pakistani listed non-financial firms. Design/methodology/approach The authors use a fixed effects panel data model over a 39 years (1972-2010) unbalanced panel data of Pakistani non-financial listed firms to determine the factors that influence capital structure of these firms. Findings The authors find that Pakistani firms prefer retained earnings to finance their business projects, and debt is easily available for experienced firms. Moreover, socio-economic collusive networks, poor corporate governance mechanism along with weak legal system provide these firms an opportunity to pass on their risk to the creditors (banks). Research limitations/implications The data set does not contain factors characterizing inter-industry heterogeneity, therefore, the authors use mean industry leverage and mean industry profitability to explore if any relationship exists between leverage of firms, and their respective industry leverage/profitability. Practical implications Pakistani non-financial firms are highly leveraged increasing their probability to face financial distress in erratic economic conditions. As such, the policy makers need to develop capital markets of Pakistan to enable a resilient corporate capital structure. Further, erratic economic conditions of Pakistan create uncertain business environment yielding short-term opportunities and to finance them Pakistani firms use short-term debt as a main financing source. The policy makers need to improve corporate governance mechanism and strengthen legal system that will go a long way to develop Pakistani capital market on sound and sustainable footing. Originality/value This is the first study that uses an extended number of variables and discovers financial behavior of firms in a bank-based economy having limited financing options, and facing erratic economic conditions.

scholarly journals Effect of 2008 Global Economic Crisis on Turkey’s Manufacturing Sector’s Performance: An Application on the Borsa Istanbul Campanies

2014 ◽  
Author(s):  
S. Serdar Karaca ◽  
Derya Ağcadağ ◽  
Müge Sağlam ◽  
Eray Baysa
Keyword(s):  
Manufacturing Sector ◽  
Working Capital ◽  
Short Term ◽  
Test Analysis ◽  
2008 Financial Crisis ◽  
Leverage Ratio ◽  
Accounts Receivable ◽  
Total Debt ◽  
Before And After ◽  
Smirnov Test

In this study we analyzed the effect of 2008 financial crisis on firm performance. With this aim we used manufacturing sector in Turkey. In our study we used 119 firms traded on Borsa Istanbul and quarterly data belong to 2004-2012 period. In this study we examined the period before and after 2008 crisis. We applied one sample kolmagorov-smirnov test to know whether the data has normal distribution. Also we used T-Test Analysis to compare average of the data. At the result of analysis financial ratios that accounts receivable turnover, liquidity, net working capital, short term debt / Total Debt, Financial Leverage Ratio, founded different in before and after year 2008, according to year 2008.

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