Operating performance and aggressive trade credit policies

Box, Travis; Davis, Ryan L.; Hill, Matthew D.; Lawrey, Chris M.

doi:10.1016/j.jbankfin.2018.02.011

Cited by 70 publications

(60 citation statements)

References 37 publications

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“…More recent proof, Abuhommous (2017) states that a firm with higher investment on trade credit would experience an increase in profit compared with the average industry investment in trade credit estimated on the figures of listed Jordania firms. More attempts have been made by Box et al (2018) to expand the effect of trade credit on other indicators of firm profitability. Their research shows a further finding which indicates that the firm extending their trade credit would have a significantly higher margins, revenues and market share associated with their competitors with similar characteristics, operational necessities and distress level.…”

Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

“…Unlike the period of the 1960s when trade credit received little attention, there has been a rapid rise in the amount of works conducted in this field. A significant number of researches have been done analyzing how firm profitability determines the trade credit extension (Demirgüç-Kunt and Maksimovic, 2001;Alarcón, 2011;De Carvalho and Schiozer, 2015;Kim, 2016) and the adverse effect (Martínez-Sola, García-Teruel and Martínez-Solano, 2014;Box et al, 2018;Zhu and Jiang, 2009;Paul, Devi and Teh, 2012). However, there has been little discussion on these relationships in a particular industry.…”

Section: Introductionmentioning

confidence: 99%

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The Impact of Trade Credit Investment on Manufacturing Firms' Profitability: Evidence from Vietnam

Pham¹,

Huynh²

2020

Acta Univ. Agric. Silvic. Mendelianae Brun.

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The aim of this study is to examine the effect that trade credit investment has on firms' profitability. The characteristics of this relationship have not been dealt with in depth for manufacturing firms. We use panel data for a total of 227 Vietnamese publicly listed manufacturing firms for the period 2005–2017. Different econometric estimation techniques such as the feasible generalized least squares, fixed effects and random effects and different calculation of firm performance such as non market-based measure (return on assets) and market-based measure (Tobin's q) are employed to validate the consistent results. The robust results confirm a statistically significant inverted U-shaped relationship between trade credit investment and profitability.

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Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

The Impact of Trade Credit Investment on Manufacturing Firms' Profitability: Evidence from Vietnam

Pham¹,

Huynh²

2020

Acta Univ. Agric. Silvic. Mendelianae Brun.

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“…For example, McGuinness et al (2018) using data for SME of 13 European countries find that one standard deviation increase in trade credit results in a 21% decrease in the likelihood of distress. Box et al (2018) provide evidence for better performance for firms that extend trade credit in excess of industry competitors with the financial characteristics. Kieschnick et al (2013) find a positive relationship between shareholder return associated with investments in working capital.…”

Section: Literature Reviewmentioning

confidence: 89%

The optimal allocation of current assets using mean-variance analysis

Κόλιας¹,

Arnis²

2019

JAMIS

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Research Question:The investigation of the optimal allocation of current assets. Motivation: Current assets investment is a decision process which affects firm value. In this paper, we develop a framework that encompasses these decisions by taking into consideration the trade-off between risk and return. Idea: We build up a model implemented in two stages. In the first stage, using random coefficient modeling on panel data, we obtain the estimates of the expected returns and standard deviations for cash holdings, inventories and receivables along with the correlations between them. Having these estimates on hand we move on to the second stage to determine the optimal allocation of current assets portfolio and construct the efficient frontier of the possible combinations of the current assets' elements. Data: For the purposes of our study we use financial data from Greek manufacturing firms, drawn from their annual income statements and balance sheets. Firms are classified into the manufacturing industry for the years 2003 to 2014. Tools: In the first stage we use random coefficient modeling on panel data while in the second stage mean-variance analysis is employed. Findings: By applying the model in the Greek manufacturing sector we find that the minimum-variance portfolio of the average firm of our data set has an expected return of 10.00% with a 6.14% standard deviation (risk) and consists of 13% cash and cash equivalents, 29% inventories and 58% receivables. Contribution: Our model would be useful to assess and monitor firms' current assets investments and may be used in the formulation of sound current assets policies and procedures.

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“…Wintoki, Linck, and Netter () and Box, Davis, Hill, and Lawrey () use a similar dynamic panel estimator to mitigate endogeneity in an empirical corporate finance setting.…”

mentioning

confidence: 99%

ETF Competition and Market Quality

Box¹,

Davis²,

Fuller

2018

Financial Management

Self Cite

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This paper examines competition between exchange traded funds (ETFs) that hold nearly identical portfolios of securities. We provide evidence that incumbent‐fund liquidity is negatively affected when a new ETF is added to an asset class. The degradation in liquidity is even more severe whenever both funds follow the same benchmark. We also document a decline in primary‐market activity for the incumbent ETFs after the arrival of new competitors. Furthermore, increasing the number of funds in an asset class does not put downward pressure on fund management fees. Thus, the deterioration in market quality may not be offset by decreasing costs of fund ownership.

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Operating performance and aggressive trade credit policies

Cited by 70 publications

References 37 publications

The Impact of Trade Credit Investment on Manufacturing Firms' Profitability: Evidence from Vietnam

The Impact of Trade Credit Investment on Manufacturing Firms' Profitability: Evidence from Vietnam

The optimal allocation of current assets using mean-variance analysis

ETF Competition and Market Quality

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