Operating performance and aggressive trade credit policies

Travis Box, Ryan Davis, Matthew Hill and Chris Lawrey

Journal of Banking & Finance, 2018, vol. 89, issue C, 192-208

Abstract: We examine the operating performance improvements associated with the extension of trade credit. Our results suggest a positive and significant relation between future profitability and contemporaneous trade credit provision. Further findings indicate significantly higher margins, revenues and market shares for firms that extend more trade credit than industry competitors with similar characteristics, operational necessities and financial distress levels. These inferences are robust to several econometric concerns such as the joint determination of trade credit extension and firm performance. Overall, our results imply that aggressive trade credit policies can provide firm management with a unique channel to improve product market performance.

Keywords: Trade credit; Supplier financing; Working capital; Operating performance (search for similar items in EconPapers)
JEL-codes: G31 G32 G39 M49 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (29)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:89:y:2018:i:c:p:192-208

DOI: 10.1016/j.jbankfin.2018.02.011

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