Trade credit and corporate investment: enhancing value creation

Bahadır Karakoç

Journal of the Asia Pacific Economy, 2024, vol. 29, issue 3, 1388-1417

Abstract: This study explores the moderating role of trade credit in the value-creation process of firms. Through panel data analysis of annual data from publicly listed firms in ten developing Asian economies, we found that both investing in capacity expansion and engaging in trade credit activity positively impact the value creation process. However, the combination of capacity expansion and trade credit leads to enhanced value creation. The findings highlight the roles played by both borrowed and supplied trade credit in this process. By examining the role of trade credit as a catalyst between corporate investment and value creation, this study provides valuable insights for policymakers and practitioners. The results suggest that firms in these economies should consider increasing their trade finance activity to achieve higher value through capacity expansion. To ensure the validity of the findings, the study conducts a series of robustness checks, including alternative regression specifications, different measures of the key variables, and diverse sample compositions.

Date: 2024
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DOI: 10.1080/13547860.2023.2266271

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