Peer influence on trade credit

Daniel Gyimah, Michael Machokoto and Sikochi, Anywhere (Siko)

Journal of Corporate Finance, 2020, vol. 64, issue C

Abstract: We examine the influence of peer firms on trade credit policies of listed firms in the United States. We posit and find evidence that firms mimic their peers in formulating trade credit policies. The findings are more pronounced for firms that operate in highly competitive product markets and an uncertain information environment. Our results show that firms not only mimic peers in similar circumstances but also imitate their more and less successful peers. We find that the benefits of mimicking peers' trade credit policies increase initially, but for firms that already maintain high levels of trade credit, these benefits diminish faster as the intensity of mimicking increases. Our results are robust to different methods of selecting peers, sampling, different proxies, and estimation techniques.

Keywords: Trade credit; Peer effects; Product market competition (search for similar items in EconPapers)
JEL-codes: C31 D22 G32 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (24)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:64:y:2020:i:c:s0929119920301292

DOI: 10.1016/j.jcorpfin.2020.101685

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