Is There Mimicking Behavior in Firms’ Trade Credit Decisions?

Rind, Asad Ali; Boubaker, Sabri; Dang, Viet Anh

doi:10.1561/114.00000003

Cited by 12 publications

(5 citation statements)

References 111 publications

(247 reference statements)

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“…According to Fazzari and Petersen (1993), who imply lower adjustment costs for working capital compared to fixed investments, the behavior could be interpreted as a "rash decision" of firms in the face of an uncertain crisis. Possibly, there could also have been a "copycat effect" here, such as that found by Rind et al (2021) in their recent study on trade credit decisions. First companies have started doing this, followed by a mimicking behavior of other market participants.…”

Section: Relationship Between Working Capital Operating Assets and Fi...mentioning

confidence: 75%

Working Capital Behavior of Firms during an Economic Downturn: An Analysis of the Financial Crisis Era

Hofmann

Töyli

Solakivi

2022

IJFS

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In times of crisis, cash and liquidity play an essential role. This paper analyzes the working capital measures over the course of a business cycle. We examine (1) how companies behave in economic downturns regarding their working capital components and (2) whether firms with higher financial constraints behave differently in economic downturns regarding their working capital components. The analyses were conducted with descriptive statistics and generalized linear mixed-effects modeling. Our dataset consists of 2111 stock-listed firms and 10,555 observations spread over the period of five years during the financial crisis era. The findings indicate that days sales outstanding and shorter days inventory held are related to better financial performance while days payable outstanding had no observable effect. Furthermore, financially constrained firms have shorter days sales outstanding than average firms. In economic downturns, firms seem to reduce both working capital and fixed investments to asset ratios. The financially constrained firms pushed down their fixed investments ratio more aggressively than average firms while, in contrast, the financially strongest firms pushed down the working capital to asset ratio in comparison to average firms. Interestingly, neither the cash conversion cycle, days payable outstanding, nor company performance or fixed investments to asset ratios fully returned to the pre-shock level. The behavior of non-financially constrained firms, which also perform better, indicates a stronger supply chain orientation than that of average firms. This might indicate that the supply chain-oriented view of working capital management could provide a more favorable and resilient alternative to the prevailing self-orientation.

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Section: Relationship Between Working Capital Operating Assets and Fi...mentioning

confidence: 75%

Working Capital Behavior of Firms during an Economic Downturn: An Analysis of the Financial Crisis Era

Hofmann

Töyli

Solakivi

2022

IJFS

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“…The existing literature also shows evidence of peer mimicking to address competitive threats in financial policies. For example, Rind et al (2021) find that firms' trade credit policies are influenced by the trade credit decisions of their peers, as fierce competition forces firms to offer trade credit when peers are providing such facilities. Therefore, rivalry is considered a potential channel through which R&D peer effects operate.…”

Section: Randd Intensity Information Asymmetry and Competitionmentioning

confidence: 99%

Industry influence on firms' R&D and innovation

Rind

Abbassi

Bigelli

et al. 2023

Financ Manag Account

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This paper examines the effect of peers on a firm's research and development (R&D) policy. We show that firms do not make R&D decisions in isolation, and that industry dynamics play an important role in defining a firm's R&D intensity. Using a large sample of 54,393 firm-year observations from 1991 to 2015 in the United States, we find that firms' R&D decisions are mainly driven by their industry peers' R&D policies. Moreover,

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“…Gyimah et al. (2020) and Rind et al. (2021) find strong evidence of peer influence on trade credit provision.…”

Section: Introductionmentioning

confidence: 96%

“…Second, we contribute to the growing literature examining the impact of peer firms on corporate policies, such as capital structure (Leary and Roberts, 2014;Francis et al, 2016), investment (Frydman, 2015), cash holding policy (Dong et al, 2021b), and dividend policies (Adhikari and Agrawal, 2018;Grennan, 2019). Gyimah et al (2020) and Rind et al (2021) find strong evidence of peer influence on trade credit provision. Our study adds to this line of literature by suggesting that corporate strategies deviating from those of peers have lower demand and supply for trade credit.…”

mentioning

confidence: 95%

Strategic deviance and trade credit

Damle

Sinha

2022

IJMF

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PurposeLiterature sparsely documents the association between the deviant behavior of a firm and its financial policies. Trade credit is one of the most critical financial policies of a firm. In this study, the authors examine the association between strategic deviance and trade credit.Design/methodology/approachThe authors explore a strategy-based explanation for trade credit by examining whether strategic deviance affects trade credit using a sample of 33 countries from 1996 to 2020. The authors test the hypothesis using static OLS regression models. To address autocorrelation and endogeneity issues, the authors use dynamic OLS models, lag models, and instrumental variable approach.FindingsThe authors find that an increase in strategic deviance reduces both demand and supply of trade credit, and the study’s results indicate that a one standard deviation increase in strategic deviance leads to a 1.34% decrease in the demand for trade credit. Also, a one standard deviation increase in strategic deviance leads to a 2.26% fall in the supply of trade credit.Practical implicationsThis study facilitates managers to formulate trade credit policies when choosing a deviant strategy.Originality/valueTo the best of the authors’ knowledge, this is the first study to explore the association between strategic deviance and trade credit policies.

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Is There Mimicking Behavior in Firms’ Trade Credit Decisions?

Cited by 12 publications

References 111 publications

Working Capital Behavior of Firms during an Economic Downturn: An Analysis of the Financial Crisis Era

Working Capital Behavior of Firms during an Economic Downturn: An Analysis of the Financial Crisis Era

Industry influence on firms' R&D and innovation

Strategic deviance and trade credit

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