Asset redeployability and trade credit

Mostafa Monzur Hasan and Nurul Alam

International Review of Financial Analysis, 2022, vol. 80, issue C

Abstract: We examine the relationship between asset redeployability and firms' use of trade credit. Using a large sample of US public firms, we document that firms with more redeployable assets use significantly less trade credit. Our cross-sectional analyses show that the negative relation between asset redeployability and trade credit is more salient for firms with more financing constraints, high levels of information asymmetry, and less corporate liquidity. These findings remain robust to alternative measures of asset redeployability, trade credit, and alternative regression specifications, and they are not driven by an endogeneity problem. Finally, we find that firms with fewer redeployable assets adjust trade credit to the target level relatively quickly when compared with firms having more redeployable assets. Overall, findings from this study provide robust evidence that asset redeployability has an important bearing on firms' short-term financing.

Keywords: Asset redeployability; Trade credit; Financing constraints (search for similar items in EconPapers)
JEL-codes: E22 G31 G32 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:80:y:2022:i:c:s1057521922000047

DOI: 10.1016/j.irfa.2022.102024

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