Do Firms Use the Trade Credit Channel to Manage Growth?

Annalisa Ferrando and Klaas Mulier

Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium from Ghent University, Faculty of Economics and Business Administration

Abstract: While many theories of accounts payable and receivable are related to firm performance, there has not been a direct test whether firms actively use them to manage their growth. We argue that it is not just the accounts payable but also the accounts receivable that matter. While the former help to alleviate imperfections in the financial market, the latter do so in the product market. Using over 2.5 million observations for 600.000 firms in 8 euro area countries in the period 1993-2009, we show that firms use the trade credit channel to manage growth. In countries where the trade credit channel is more present, the marginal impact is lower, but the total impact is still bigger. Further, firms that are more vulnerable to financial market imperfections, and therefore more likely to be financially constrained, rely more on the trade credit channel to manage growth. Finally, we show that also the overall conditions of the financial market matter for the importance of the trade credit channel for growth.

Keywords: firm performance; trade credit; accounts payable; accounts receivable (search for similar items in EconPapers)
JEL-codes: C23 E44 G32 L25 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2012-11
New Economics Papers: this item is included in nep-bec and nep-ent
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://wps-feb.ugent.be/Papers/wp_12_820.pdf (application/pdf)

Related works:
Journal Article: Do firms use the trade credit channel to manage growth? (2013)
Working Paper: Do firms use the trade credit channel to manage growth? (2012)
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:rug:rugwps:12/820

Access Statistics for this paper

More papers in Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium from Ghent University, Faculty of Economics and Business Administration Contact information at EDIRC.
Bibliographic data for series maintained by Nathalie Verhaeghe ().