Corporate growth – Trade credit relationship: Evidence from a panel of countries

Karakoç, Bahadır

doi:10.1016/j.bir.2021.03.004

Cited by 9 publications

(9 citation statements)

References 34 publications

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“…EFD firms, by definition, lack the necessary funding to fully finance their capital investments, and thus rely on external sources such as TC, while at the same time adding to their market power through investment in physical assets. As discussed in the literature (see, for example, Fabbri and Menichini, 2010;Karakoç, 2022a), stronger support from suppliers and enhanced TC terms are expected due to the shared future and increased market power of the borrower, as confirmed by the regression output in Tab. 2 and 3.…”

Section: Discussionsupporting

confidence: 57%

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Working Capital Management and Performance in Financially Dependent Firms: Evidence from Developing Asian Economies

Karakoç¹

2023

EJOBSAT

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This paper examines the impact of working capital management on firm performance in nine developing economies in Asia. Specifically, the study focuses on two critical aspects: the management of trade credit and inventory. The empirical findings reveal that effective management of these components significantly enhances the performance of financially dependent firms. In fact, during critical periods such as the 2008 financial crisis, these management strategies helped to boost performance considerably. However, no comparable association was observed in other firms within the sample. These results suggest that appropriate handling of trade credit and inventory can yield a significant performance advantage.

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Section: Discussionsupporting

confidence: 57%

“…The substitutionary role of trade credit (hereafter referred to as TC) has been widely recognized in the literature (e.g., Schwartz, 1974;Ferris, 1981;Fisman and Love, 2003;Goto et al, 2015;Abdulla et al, 2017;Karakoç, 2022a). It suggests that delayed payment for inventory purchased from a supplier serves as a source of liquidity.…”

Section: Introductionmentioning

confidence: 99%

Working Capital Management and Performance in Financially Dependent Firms: Evidence from Developing Asian Economies

Karakoç¹

2023

EJOBSAT

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“…Shou et al (2020) apply signaling theory to explore the relationship between social responsibility performance and trade credit of SMEs in China and find that CSR performance has a U-shaped effect on the trade credit of SMEs, that is, to a certain extent, commitment to social responsibility will send positive signals to outsiders about operational performance, more reputation and ethics. Karakoç (2021) concludes by analyzing data from nine listed corporations in developed countries that growth corporations can not only use trade credit as a source of liquidity but also provide trade credit to partners to promote sales and profitability. Fan et al (2022) examines the relationship between credit ratings and trade credit and finds that corporations with A-rating are able to obtain more trade credit from their suppliers than non-A-rated corporations.…”

Section: Literature Review 21 Influencing Factors In Supply Chain Fin...mentioning

confidence: 99%

The impact of information transparency on trade credit: the mediation role of risk

Yang

2022

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PurposeExisting literature demonstrates the important role of information transparency in enterprise development and market surveillance. However, little empirical research has examined the information transparency effect in supply chain management. This study aims to fill this gap by exploring the significant role of information transparency on supply chain financing and its mechanism, taking trade credit as the starting point.Design/methodology/approachFrom the data set comprising 3,880 Chinese firms with A-shares listed on the Shenzhen and Shanghai Stock Exchanges from 2011 to 2020, we obtain the basic picture of information transparency and trade credit. Panel fixed effects regression is used to test the hypotheses concerning the antecedents to trade credit.FindingsThe empirical results show that: first, information transparency can significantly support corporate access to trade credit and is found to facilitate financing by mitigating perceived risk. Second, among companies with higher levels of financing constraints, weaker market power and more concentration of suppliers, information transparency promotes trade credit more markedly. Third, the outbreak of COVID-19 causes a substantial increase in uncertainty and risk in external circumstances and then the effect of information transparency is weakened. Fourth, the contribution to trade credit is likely to be stronger for disclosures containing management transparency elements compared to single financial transparency.Originality/valueTo the best of our knowledge, this study is one of the first to explore the positive role of information transparency to supply chain financing, which to a certain extent makes up for the lack of information transparency research in the supply chain. It provides new ideas for enterprises to obtain trade credit financing and promote the improvement of supervision departments’ disclosure policies.

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“…McGuinness et al (2018) showed that trade credit investment, proxied by the accounts receivables to total assets ratio, in 13 European countries is 30% on average, ranging from 13% in Latvia to 49% in Greece. 2 Furthermore, it is demonstrated that trade credit investment, as measured by the ratio of accounts receivable to total assets, is 19% on average in 9 developed countries, ranging from 12% in Canada to 26% in France 3 (Karakoç, 2022). Based on the Turkish Central Bank Balance Sheets for the 2009-2021 period, the short-term accounts receivables to total assets ratio is approximately 23% and the ratio of accounts receivables to current assets is 37% in the manufacturing industry (CBRT, 2023).…”

Section: Introductionmentioning

confidence: 99%

“…McGuinness et al (2018) reported that other countries have accounts receivable to total assets ratio of 34% in Belgium, 16% in Finland, 29% in France, 20% in Germany, 19% in Hungary, 28% in Ireland, 37% in Italy 37%, 27% in Poland, 36% in Portugal, 30% in Spain, and 22% in the UK.3Karakoç (2022) indicates that the other countries' trade credit investments are as follows: 15% in Australia, 21% in Germany, 25% in Italy, 23% in Japan, 21% in Korea, 18% in the UK, and 14% in the US.…”

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confidence: 99%

A causal and nonlinear relationship between trade credit policy and firm value: evidence from an emerging market

Karaca

2023

EBR

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This study examines whether there is a causal and nonlinear relationship between trade credit policy and firm value. In line with this purpose, the 2005Q1 - 2018Q4 period data is examined for 103 companies operating in the manufacturing industry in an emerging market, Borsa Istanbul, and the relationships revealed. The nonlinear relationship between trade credit and firm value has been proved with the Two-step System GMM (Generalized Moment of Methods) and causality with Dumitrescu - Hurlin (2012) heterogeneous panel causality tests. According to the findings, a nonlinear (inverted U-shaped) relationship has been found between trade credit policy and firm value. Moreover, the values of firms that have moved away from optimum trade credit levels are also negatively affected. One of the original aspects of this study is that the bidirectional causal relationship between trade credit policy and firm value has been revealed.

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Corporate growth – Trade credit relationship: Evidence from a panel of countries

Cited by 9 publications

References 34 publications

Working Capital Management and Performance in Financially Dependent Firms: Evidence from Developing Asian Economies

Working Capital Management and Performance in Financially Dependent Firms: Evidence from Developing Asian Economies

The impact of information transparency on trade credit: the mediation role of risk

A causal and nonlinear relationship between trade credit policy and firm value: evidence from an emerging market

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