The real driver of trade credit

Daisuke Tsuruta and Hirofumi Uchida

Pacific-Basin Finance Journal, 2019, vol. 57, issue C

Abstract: This paper examines the effects of real and financial measures that firms adopt to respond to adverse shocks on trade credit that they owe. We find that a reduction in the quantity of purchases reduces trade credit, while lengthening the period of accounts payable increases it. However, the effect of the former is more economically significant than that of the latter. Our findings suggest that changes in the amount of underlying real transactions are the true driver of trade credit during a crisis period, and the flexible adjustment of trade credit terms might not be an effective means to respond to adverse shocks.

Keywords: Trade credit; Real driver; Financial driver; Terms of trade credit (search for similar items in EconPapers)
JEL-codes: G32 L14 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (3)

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Related works:
Working Paper: Real Driver of Trade Credit (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:57:y:2019:i:c:s0927538x1930023x

DOI: 10.1016/j.pacfin.2019.101183

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