EconPapers    
Economics at your fingertips  
 

Determinants of Trade Credit Extended by Manufacturing Firms Listed in Pakistan

Nisar Ahmad (), Talat Afza and Bilal Nafees
Additional contact information
Nisar Ahmad: Hailey College of Commerce, University of the Punjab, Lahore
Bilal Nafees: University of Education, Lahore

Business & Economic Review, 2017, vol. 9, issue 4, 287-314

Abstract: This paper investigates the determinants of trade credit extended by listed manufacturing firms in Pakistan. Dynamic panel model is estimated by applying system GMM one step and two step estimators on the financial data of 327 manufacturing firms listed in PSX Pakistan for the period 2005 to 2015. Results of the study reveal that trade credit policies of firms are dynamic instead of static. Firms have the target level for trade credit extended and make partial adjustment over time to reach at its optimal level. However, the speed of making adjustments is relatively low due to high cost of making adjustments. Positive and significant relationship of trade credit extended with credit received from suppliers and banks indicates that listed manufacturing firms are following the credit redistribution hypothesis. Further, it is also observed that sales growth and market power of firms have significant and negative effect whereas inventory and relative liquidity position have significant and positive effect on the trade credit extended by listed manufacturing firms. Overall findings of the study suggest that managers should consider changes in the financial characteristics of their firms while making partial adjustments in the trade credit policy. For future research, investigation of the effects of customers’ characteristics and financial development on the trade credit extended by listed manufacturing firms is proposed.

Keywords: Dynamic Panel Model; Listed Manufacturing Firms; and Trade Credit Extended (search for similar items in EconPapers)
JEL-codes: C39 G39 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://imsciences.edu.pk/files/journals/volume9_No%204/Paper%2013.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bec:imsber:v:9:y:2017:i:4:p:287-314

DOI: dx.doi.org/10.22547/BER/9.4.13

Access Statistics for this article

More articles in Business & Economic Review from Institute of Management Sciences, Peshawar, Pakistan Institute of Management Sciences 1-A, Sector E-5, Phase VII, Hayatabad, Peshawar- Pakistan. Contact information at EDIRC.
Bibliographic data for series maintained by Dr. Attaullah Shah ().

 
Page updated 2019-09-18
Handle: RePEc:bec:imsber:v:9:y:2017:i:4:p:287-314