Do Firms Use the Trade Credit Channel to Manage Growth?
By Annalisa Ferrando, Klaas Mulier. Social Science Research Network, 2013
278 citations recorded by the source corpus.
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 higher. Further, firms that are more vulnerable to financial market imperfections, 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.
Subfields: Accounting, Economics and Econometrics
View Paper: https://www.semanticscholar.org/paper/10af5bbc7d0ee91717492b3ed43e6872afaebbae
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Citations in the corpus
- The influence of economic policy uncertainty on corporate trade credit and firm value (2020, background): “Ferrando and Mulier (2013) argue that firms use both accounts receivable and payable to manage performance and growth.”
- Bank lending constraints, trade credit and alternative financing during the financial crisis: Evidence from European SMEs (2014, background): “Elsewhere, Ferrando and Mulier (2013) find that financially constrained firms are more likely to use trade credit as part of their overall growth strategy.”
- European trade credit use and SME survival (2018, unknown): “Prior studies (e.g., Casey and O'Toole, 2014; Carbo-Valverde et al., 2009, 2016; Garcia-Appendini and Montoriol-Garriga, 2013; Ferrando and Mulier, 2013; Petersen and Rajan, 1997) support the view that trade credit provides a useful buffer for financially”
- The differential impact of leverage on the default risk of small and large firms (2020, background): “Some companies may use trade credit to spur growth (Ferrando and Mulier, 2013), especially during the first years of a firm’s life (Robb and Robinson, 2012).”