The declining trend in trade credit ratios: The impact of firm‐specific and macro factors

Ranjan D’Mello, Mark Gruskin and Francesca Toscano

Review of Financial Economics, 2022, vol. 40, issue 4, 389-417

Abstract: Despite the importance of trade credit as a source of financing, there is a significant and persistent decline in this form of short‐term borrowing and lending over the 1979 to 2018 interval. The median firm's accounts receivable decreased by 52% while accounts payable ratio fell by 47%. The decline is systematic, as it is present in most industries and sub‐samples of firms classified on different characteristics. Further, firms’ trade credit ratios are significantly less than predicted ratios based on firm‐specific characteristics and industry factors, and this deficiency, which is pervasive, becomes more negative over time. However, changes in macroeconomic factors such as financial shocks, interest rates, changes in monetary policy and corporate tax rates, credit available in the economy, and the transition from manufacturing to technology‐oriented economy, explain the deficiency as well as the time pattern.

Date: 2022
References: Add references at CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1002/rfe.1150

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wly:revfec:v:40:y:2022:i:4:p:389-417

Access Statistics for this article

More articles in Review of Financial Economics from John Wiley & Sons
Bibliographic data for series maintained by Wiley Content Delivery ().