Factors affecting trade credit in India

Debidutta Pattnaik and H. Kent Baker

International Review of Economics & Finance, 2023, vol. 88, issue C, 634-649

Abstract: Managing working capital, such as trade credit, is essential for operational sustainability and firm growth in emerging markets. Most studies that examine the factors influencing trade credit focus on developed countries, not emerging markets. Our study helps to fill this gap by examining whether corporate governance and firm-specific variables affect India's trade credit. It also provides new insights into the determinants of trade credit receivables and payables in an emerging market. We find a significantly positive association between CEO duality and trade credit receivables. Although centralizing power by Indian firms heightens exposure to operational risk, it may enhance sales and increase profitability. Additionally, managers of firms with centralized control tend to be conservative, reducing their dependence on creditors and alternative financing of their current assets.

Keywords: Corporate governance; Trade credit; Receivables; Payables; Panel data; Generalized method of moments (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:88:y:2023:i:c:p:634-649

DOI: 10.1016/j.iref.2023.07.005

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