Is There Mimicking Behavior in Firms’ Trade Credit Decisions?

Asad Ali Rind, Sabri Boubaker and Viet Anh Dang
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Asad Ali Rind: IU - Iqra University, IRG - Institut de Recherche en Gestion - UPEC UP12 - Université Paris-Est Créteil Val-de-Marne - Paris 12 - Université Gustave Eiffel
Sabri Boubaker: Métis Lab EM Normandie - EM Normandie - École de Management de Normandie = EM Normandie Business School, IRG - Institut de Recherche en Gestion - UPEC UP12 - Université Paris-Est Créteil Val-de-Marne - Paris 12 - Université Gustave Eiffel
Viet Anh Dang: University of Manchester [Manchester]

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Abstract: This paper investigates whether peer firms affect trade credit policy. Using data on US listed firms for the period 1997–2015, we document strong evidence of peer influence on trade credit provision. This result remains significant after using alternative trade credit measures, different peer proxies, and addressing endogeneity concerns using an instrumental variable approach based on the stock price shocks of industry peers. Our cross-sectional analysis further shows that peer effects in trade receivables only exist among suppliers that face fierce product market competition, consistent with the notion that firms closely mimic their peers due to competitive pressure. There is, however, mixed, and weak evidence on the argument that peer mimicking is driven by learning and reputational motives. Overall, our study highlights the important role of peer firm behavior in shaping a firm's trade credit policy.

Keywords: Trade credit; Accounts receivable; Firm behavior; Peer effects; Mimicking (search for similar items in EconPapers)
Date: 2021-04-29
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Published in Review of Corporate Finance, 2021, 1 (1-2), pp.81-134. ⟨10.1561/114.00000003⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05066961

DOI: 10.1561/114.00000003

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