Firm life cycle and trade credit

Mostafa Monzur Hasan, Adrian (Wai‐Kong) Cheung, Lidia Tunas and Hung Wan Kot

The Financial Review, 2021, vol. 56, issue 4, 743-771

Abstract: This study investigates the relation between firm life cycle and trade credit. We find evidence that firms in the introduction, growth, and decline stages use significantly more trade credit, whereas firms in the mature stage use significantly less trade credit. Firm life cycle works as a separate channel to affect trade credit independently from other channels proposed in the literature. These results are robust to alternative regression specifications, alternative measures of life cycle and trade credit, and the endogeneity concern. Firms in the introduction and decline stages adjust trade credit to the target level quickly compared to others.

Date: 2021
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