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Journal articles on the topic 'Trade Credit Management'

Author: Grafiati

Published: 4 June 2021

Last updated: 8 February 2022

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1

Harris, Chris, and Scott Roark. "Exploring the decline in trade credit investment." Managerial Finance 43, no. 12 (December 4, 2017): 1375–91. http://dx.doi.org/10.1108/mf-04-2017-0140.

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Purpose The purpose of this paper is to identify three factors leading to the observed decline in trade credit offered from publicly traded firms. Design/methodology/approach The study conducts firm fixed effect regressions testing the relationship between cash flow volatility and firm investment in trade credit. The relationship is further examined with all firms separated into two groups, based on SIC codes, designating if they are in industries that traditionally offer higher amounts of trade credit. Findings The proportion of US firms that has traditionally extended the most trade credit has been decreasing over time, contributing to part of the decline in trade credit offered. Increases in cash flow volatility have also contributed to decreasing investment in trade credit. The negative relationship with cash flow volatility is greatest amongst firms that traditionally place the highest value on trade credit. Firms with access to credit, proxied by investment grade debt ratings, do not experience the same decline in trade credit offered. Practical implications Firms that value the ability to extend trade credit may maintain their level of investment in trade credit, even with increased risk of cash flow volatility, by maintaining a comparative advantage in access to credit. Originality/value This study extends prior findings by providing three previously unexplored explanations for the decline in offered trade credit seen in the USA. The changing make-up of publicly traded firms, a market-wide increase in cash flow volatility, and access to credit all play an important role in observed declines of trade credit investment.

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Hill, Matt, Katerina Hill, Lorenzo Preve, and Virginia Sarria-Allende. "International evidence on the determinants of trade credit provision." Managerial Finance 45, no. 4 (April 8, 2019): 484–98. http://dx.doi.org/10.1108/mf-07-2018-0295.

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PurposeThe purpose of this paper is to examine whether the level of financial credit available in a country influences the level of trade credit provided to customers.Design/methodology/approachThe authors examine the association between the supply of trade credit and the availability of country-level private financial credit using multivariate regression models that account for country-level heterogeneity, macroeconomic conditions and firm-specific characteristics. The data set is a pooled sample of publicly traded firms incorporated in 66 countries.FindingsSupporting the re-distributional view of trade credit, robust results suggest that suppliers incorporated in countries with increased access to financial credit provide increased trade credit to their customers. Further results indicate significant differences in trade credit usage across geographical regions. Consistent with existing research using samples of US firms, the use of trade credit is correlated with firm-level measures of financial constraints and product market dynamics.Originality/valueThe authors provide one of the first studies to examine differences in trade credit extension across a large number of countries.

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3

Schnabel, Jacques, and Jonathan Frank. "Streamlining Trade Credit Decisions." Journal of Applied Business Research (JABR) 4, no. 2 (October 27, 2011): 26. http://dx.doi.org/10.19030/jabr.v4i2.6430.

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Investigating the trade credit-worthiness of new customers can involve time-consuming and expensive tasks which may impair customer goodwill and results in lost sales. This article examines the role that PC based decision support systems and expert systems can play in streamlining trade credit decisions.

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4

Boden, Rebecca, and Salima Yassia Paul. "Creditable behaviour? The intra-firm management of trade credit." Qualitative Research in Accounting & Management 11, no. 3 (September 23, 2014): 260–75. http://dx.doi.org/10.1108/qram-08-2012-0032.

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Purpose – This paper aims to explore the reasons for the apparent failure of many UK firms to achieve the competitive advantages indicated in largely positivist literature through the management of their trade credit positions. Design/methodology/approach – The paper utilises data from a set of semi-structured interviews with trade credit managers in firms and is the first substantial qualitative study of the intra-firm aspects of trade credit management in the UK. Through this approach, we explore the reasons why the theoretical promise of trade credit may or may not be realised. Findings – The principal findings relate to the importance of three organisational attributes (skills/awareness, communication and structural position of the activity in the firm). That is, trade credit management should be regarded as a relational activity and not merely a narrow technical function. The paper finds that there is no generic formulation of these attributes that can deliver on the promise of trade credit identified in the extant literature. Rather, individual firms must adapt themselves to suit their circumstances. Practical implications – This paper will be of interest to and is relevant for companies, accounting professionals and policymakers. Trade credit represents a significant area of commercial risk, and the problems experienced with its effective management have previously proved somewhat intractable. Originality/value – This paper reports on the first substantial piece of UK work to look at the actualities of how trade credit is managed within firms and what the implications of this are.

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5

Sokolovska, Olena. "Trade Credit Insurance and Asymmetric Information Problem." Scientific Annals of Economics and Business 64, no. 1 (March 1, 2017): 123–37. http://dx.doi.org/10.1515/saeb-2017-0008.

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Abstract The presence of different risk factors in international trade gives evidence of the necessity of support in gaps that may affect exporters’ activity. To maximize the trade volumes and in the same time to minimize the exporters’ risks the stakeholders use trade credit insurance. The paper provides analysis of conceptual background of the trade credit insurance in the world. We analyzed briefly the problems, arising in insurance markets due to asymmetric information, such as adverse selection and moral hazard. Also we discuss the main stages of development of trade credit insurance in countries worldwide. Using comparative and graphical analysis we provide a brief evaluation of the dynamics of claims and recoveries for different forms of trade credit insurance. We found that the claims related to the commercial risk for medium and long trade credits in recent years exceed the recoveries, while with the political risk the reverse trend holds. And we originally consider these findings in terms of information asymmetry in the trade credit insurance differentiated by type of risk.

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6

Daellenbach, H. G. "Inventory Control and Trade Credit." Journal of the Operational Research Society 37, no. 5 (May 1986): 525. http://dx.doi.org/10.2307/2582676.

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7

Daellenbach, H. G. "Inventory Control and Trade Credit." Journal of the Operational Research Society 37, no. 5 (May 1986): 525–28. http://dx.doi.org/10.1057/jors.1986.88.

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Kehinde, Adesina, DosunmuAyodele Benjamin, Adedayo Ojo, Ajetunmobi Opeyemi, and OderindeAbel Abiodun. "MANAGEMENT ANDCONTROL OF TRADE CREDIT IN COMMERCE." International Journal of Advanced Research 5, no. 6 (June 30, 2017): 983–89. http://dx.doi.org/10.21474/ijar01/4500.

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9

Summers, Barbara, and Nicholas Wilson. "Trade credit and customer relationships." Managerial and Decision Economics 24, no. 6-7 (2003): 439–55. http://dx.doi.org/10.1002/mde.1041.

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10

Yang, Honglin, Heping Dai, Hong Wan, and Lingling Chu. "Optimal credit periods under two-level trade credit." Journal of Industrial & Management Optimization 16, no. 4 (2020): 1753–67. http://dx.doi.org/10.3934/jimo.2019027.

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11

Cook, Lisa D. "Trade credit and bank finance." Journal of Business Venturing 14, no. 5-6 (September 1999): 493–518. http://dx.doi.org/10.1016/s0883-9026(98)00026-3.

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Lezgovko, Aleksandra, and Andrej Jakovlev. "The Evaluation of Trade Credit Insurance in Lithuanian Business Market as a Credit Risk Management Tool." Economics and Culture 14, no. 1 (June 27, 2017): 5–20. http://dx.doi.org/10.1515/jec-2017-0001.

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AbstractIn today’s trade, the vast majority of commercial transactions in both domestic and international trade are concluded by applying trade credit terms. The aim of this article is to analyse the trade credit insurance and, according to the methodology, to evaluate it as a credit risk management tool in the context of Lithuanian business market. The authors have proposed a methodology that combines theoretical and practical research methods. First of all, with assistance of qualitative analysis, the alternative external credit risk management tools were examined. Such analysis allows not only to identify the advantages, disadvantages and benefits of researched risk management tools but also to assess the efficiency and rationality of trade credit insurance in the context of alternative methods. In order to carry out an assessment in the practical aspect, considering the lack of statistical data, it was decided additionally to perform an expert evaluation. After performing an assessment of trade credit insurance, it was concluded that in international trade, with a large buyer portfolio and high sales volume, the trade credit insurance becomes the most effective and rational way to manage credit risk, which eliminates the losses because of the debtor’s insolvency or bankruptcy, manages countries and sector’s risks and helps to discipline the debtor, what determines the decline in overdue accounts frequencies, amounts and volumes.

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Ивченко, Юлия, and Yuliya Ivchenko. "Company credit policy as a factor in its effective and long-term development." Russian Journal of Management 2, no. 3 (July 1, 2014): 123–36. http://dx.doi.org/10.12737/10590.

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The scientific and practical publications and regulatory sources for essence credit policy of the firm are analyzed. Based on the analysis it was concluded that there is no unified approach to the content of the term «company credit policy». The credit policy of the firm as a set of principles and methods for management of accounts receivable and the provision of trade credit to buyers; management of payables and bank credits as the main sources of borrowed working capital; management of free cash in the form of giving commercial loans to other companies and opening bank deposits examined.

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Deari, F., and V. V. Lakshina. "Factors Determining Trade Credit Dynamics During Crisis: Panel Data Analysis for Macedonian Firms." Finance: Theory and Practice 23, no. 2 (May 4, 2019): 17–30. http://dx.doi.org/10.26794/2587-5671-2019-23-2-17-30.

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The study is aimed at determining the factors influencing the trade credits dynamics for twenty three firms registered on the Macedonian Stock Exchange, as well as at checking for crisis effects from 2011 to 2015. The study includes a review of the literature on commercial credit factors; elaborately analyzed descriptive statistics of the collected data and dependent variable variance; tests for unobservable effects and their functional form; evaluation of panel regression and interpretation of the results. The authors have proved that net trade credits for these firms depends mainly on the growth potential of lagging firms and their vulnerability, and the crisis effects are significant only for the latter factor. Moreover, the overall efficiency of firms’ assets and their ability to convert income into cash does not have a significant impact in the crisis and post-crisis periods. The growth opportunities and profitability demonstrate a negative impact, meaning that growing and more profitable firms on average tend to expand and receive more trade credits than counterparties. Profitability has a significant impact on trade credit and the effect is seen during the first year after the crisis. Thus, the dynamics of trade credits of registered Macedonian firms is largely determined by the internal factors of a firm, and not by the external macroeconomic situation. Therefore, better financial management is suggested to improve the trade credit policy. One of the directions for further research is the evaluation of the autoregressive component of the trade credit dynamics, as well as including spatial effects in the regression equation.

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15

Shang, Chenguang. "Trade credit and stock liquidity." Journal of Corporate Finance 62 (June 2020): 101586. http://dx.doi.org/10.1016/j.jcorpfin.2020.101586.

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Gyimah, Daniel, Michael Machokoto, and Anywhere (Siko) Sikochi. "Peer influence on trade credit." Journal of Corporate Finance 64 (October 2020): 101685. http://dx.doi.org/10.1016/j.jcorpfin.2020.101685.

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17

Zimon, Grzegorz, and Robert Dankiewicz. "Trade Credit Management Strategies in SMEs and the COVID-19 Pandemic—A Case of Poland." Sustainability 12, no. 15 (July 29, 2020): 6114. http://dx.doi.org/10.3390/su12156114.

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Every large or small enterprise needs to have financial liquidity and to be able to generate profits to develop. It is not important in which sector it operates, whether it is a private or public one, but profits and safety are two elements every enterprise is not able to function without. The low performance of these two measures can cause a number of difficulties for managers. To avoid this, leading companies, especially the smallest ones, should optimize the trade credit management policy. Most often, SMEs’ (small and medium-sized enterprises) owners try to work together as part of a group purchasing organization, which positively affects trade credit management. The aim of the paper is to present the trade credit management strategy in Polish group purchasing organizations during the COVID-19 pandemic. The study uses data on the construction sector because it is one of the most important segments of the Polish economy, which is financed to a large extent with trade credit. The paper indicates the mechanisms whose applications allowed SMEs operating in purchasing groups to change trade credit management strategies in such a way that these units could operate calmly and safely in the market. These changes could be observed in purchasing goods with a large reserve, strictly controlling all receivables, switching to cash sales or limiting sales on long-term trade credit. The analysis showed that enterprises changed trade credit management strategies from moderately conservative to highly conservative.

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18

Chung, Kee H. "Inventory Control and Trade Credit Revisited." Journal of the Operational Research Society 40, no. 5 (May 1989): 495. http://dx.doi.org/10.2307/2583622.

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Chung, Kee H. "Inventory Control and Trade Credit Revisited." Journal of the Operational Research Society 40, no. 5 (May 1989): 495–98. http://dx.doi.org/10.1057/jors.1989.77.

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20

Michalski, Grzegorz. "Portfolio management approach in trade credit decision making." Medjunarodni problemi 59, no. 4 (2007): 546–59. http://dx.doi.org/10.2298/medjp0704546m.

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The basic financial purpose of an enterprise is maximization of its value Trade credit management should also contribute to realization of this fundamental aim. Many of the current asset management models that are found in financial management literature assume book profit maximization as the basic financial purpose. These book profit-based models could be lacking in what relates to maximization of enterprise value. The enterprise value maximization strategy is executed with a focus on risk and uncertainty. This article presents the consequences that can result from operating risk that is related to purchasers using payment postponement for goods and/or services. The present article offers a method that uses portfolio management theory to determine the level of accounts receivable in a firm.

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21

Mättö, Markus, and Mervi Niskanen. "Religion, national culture and cross-country differences in the use of trade credit." International Journal of Managerial Finance 15, no. 3 (June 3, 2019): 350–70. http://dx.doi.org/10.1108/ijmf-06-2018-0172.

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Purpose The purpose of this paper is to investigate whether religion or national culture can explain previously observed cross-country variation in trade credit. Design/methodology/approach Using the firm-level SME data from 35 European countries, religion and cultural factors of Hofstede and Schwartz, the authors provide new evidence on the determinants of the cross-country variation in trade credit. Findings The results indicate that religion and national culture are associated with trade credit. The authors find that the levels of trade credit are higher in Catholic countries than in Protestant ones and that peoples’ religiousness has an impact on trade credit only in Catholic countries. The authors also find that Hofstede’s cultural dimensions, such as power distance and uncertainty avoidance, are positively associated with trade credit. Practical implications Overall, authors’ findings indicate that religion and national culture are important determinants of trade credit management, and that the association between commonly used cultural values and trade credit depends on the religious, legal, and financial environment. Originality/value To the best of authors’ knowledge, this is the first study to research the relationship between national culture and trade credit.

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22

Hartsema, Sarah Taylor, Chris Harris, Zhe Li, and Thibaut G. Morillon. "Intangible assets and trade credit policy." Managerial Finance 47, no. 9 (April 29, 2021): 1286–99. http://dx.doi.org/10.1108/mf-07-2020-0372.

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PurposeThe purpose of this paper is to identify whether the rise in intangible asset investment is related to trade credit investment and whether this relationship is driven by financial constraint and other firm factors.Design/methodology/approachThe study conducts fixed effect regressions testing the relationship between trade credit investment and intangible asset levels. The relationship is further examined for all firms based on product type, financial constraint and sales growth.FindingsThere is a negative relationship between investment in trade credit and the level of intangible assets as a proportion of total assets. This negative relationship is largely explained by firms in industries that traditionally utilize more trade credit, firms with financial constraints and firms with low sales growth.Practical implicationsThe level of investment in intangible assets continues to rise, while investment in trade credit is declining. This paper is the first to identify whether these trends could be related and to provide some explanation why.Originality/valueThis study is the first to link investment in trade credit with investment in intangible assets. There is a negative relationship that is most pronounced for firms that typically offer more trade credit, that are experiencing financial constraint and that are experiencing low growth.

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Huang, Yung Fu. "RETAILER'S INVENTORY POLICY UNDER SUPPLIER'S PARTIAL TRADE CREDIT POLICY." Journal of the Operations Research Society of Japan 48, no. 3 (2005): 173–82. http://dx.doi.org/10.15807/jorsj.48.173.

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Konieva, Tetiana. "Justification of sale terms as a way to minimize the cost of trade credit." Investment Management and Financial Innovations 17, no. 3 (October 7, 2020): 360–72. http://dx.doi.org/10.21511/imfi.17(3).2020.27.

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The individual and implicit nature of the trade credit cost can provoke its increase, and, as a result, violate payment discipline and negative influence on the business price.This research is dedicated to improving the sale terms definition to minimize the cost of trade credit. The methods for determining the cost of trade credit of a particular company are proposed to apply, considering the results of the comparative analysis of other enterprises from the same industry. Based on the example of Ukrainian food processing enterprises, it was revealed that 66% of them for the period 2013–2018 had an aggressive policy, and in 44% of the cases, it was connected with the growing role of trade credit. Minimum (23 days) and average (79 days) days payable outstanding, defined in the industry, were equated, respectively, to discount period and payment delay. Considering and comparing the cost of trade credit with alternative financial resources, the marginal level of the discount was determined. Considering the rate of short-term credit, according to the failed discount method, this level is 2.7% for 2018; toward the effective annual rate method – 2.48%. In the case of the overdraft, the marginal discount is 2.9% and 2.66%, respectively.When the actual discount is equal or below this level, the buyer attracts trade credit instead of bank loans. Discount higher than marginal, longer discount period, and cheap alternative financing sources provide early payments, positive financial results, and make trade credit free of charge.

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Martínez-Sola, Cristina, Pedro J. García-Teruel, and Pedro Martínez-Solano. "Trade credit and SME profitability." Small Business Economics 42, no. 3 (June 19, 2013): 561–77. http://dx.doi.org/10.1007/s11187-013-9491-y.

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Jaggi, Chandra, and Mona Verma. "Two echelon partial trade credit financing in a supply chain derived algebraically." Yugoslav Journal of Operations Research 22, no. 2 (2012): 163–82. http://dx.doi.org/10.2298/yjor100108017j.

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Trade credit financing has become a powerful tool to improve sales & profit in an industry. In general, a supplier/retailer frequently offers trade credit to its credit risk downstream member in order to stimulate their respective sales. This trade credit may either be full or partial depending upon the past profile of the downstream member. Partial trade credit may be offered by the supplier/retailer to their credit risk downstream member who must pay a portion of the purchase amount at the time of placing an order and then receives a permissible delay on the rest of the outstanding amount to avoid non-payment risks. The present study investigates the retailer?s inventory problem under partial trade credit financing for two echelon supply chain where the supplier, as well as the retailer, offers partial trade credit to the subsequent downstream member. An algebraic approach has been applied for finding the retailer?s optimal ordering policy under minimizing the annual total relevant cost. Results have been validated with the help of examples followed by comprehensive sensitivity analysis.

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Molamohamadi, Zohreh, and Abolfazl Mirzazadeh. "Ordering Policies of a Deteriorating Item in an EOQ Model under Upstream Partial Order-Quantity-Dependent Trade Credit and Downstream Full Trade Credit." Advances in Operations Research 2021 (April 12, 2021): 1–13. http://dx.doi.org/10.1155/2021/6620084.

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In the classical inventory systems, the retailer had to settle the accounts of the purchased items at the time they were received. But in practice, the supplier applies some strategic tools, such as trade credit contract, to enhance his sales channel and offers delay period to his customers to settle the account. Any member of the supply chain may offer full or partial trade credit contract to his downstream level. Full trade credit is the case that the latter is allowed to defer the whole payment to the end of the credit period. In partial trade credit, however, the downstream supply chain member must pay for a proportion of the purchased goods at first and can delay paying for the rest until the end of the credit period. This paper considers a two-level trade credit, where the supplier offers order-quantity-dependent partial trade credit to a retailer, who suggests full trade credit to his customers. An economic order quantity (EOQ) inventory model of a deteriorating item is formulated here, and the Branch and Reduce Optimization Navigator is applied to find the optimal replenishment policy. The sensitivity of the variables on different parameters has been analyzed by applying some numerical examples. The data reveal that increasing the credit periods of the retailer and the customers can decrease and increase the retailer’s total cost, respectively.

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Han, Liang, Song Zhang, and Francis J. Greene. "Bank market concentration, relationship banking, and small business liquidity." International Small Business Journal: Researching Entrepreneurship 35, no. 4 (December 28, 2015): 365–84. http://dx.doi.org/10.1177/0266242615618733.

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This article examines two contrasting interpretations of how bank market concentration ( Market Power Hypothesis) and banking relationships ( Information Hypothesis) affect three sources of small firm liquidity (cash, lines of credit, and trade credit). Supportive of a market power interpretation, we find that in a highly concentrated banking market, small firms hold less cash, have less access to lines of credit, and are more likely to be financially constrained, use greater amounts of more expensive trade credit, and face higher penalties for trade credit late payment. We also find support for the information hypothesis: relationship banking improves small business liquidity, particularly in a concentrated banking market, thereby mitigating the adverse effects of bank market concentration derived from market power. Our results are robust to different cash, lines of credit, and trade credit measures and to alternative empirical approaches.

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Afrifa, Godfred Adjapong, and Ernest Gyapong. "Net trade credit: what are the determinants?" International Journal of Managerial Finance 13, no. 3 (June 5, 2017): 246–66. http://dx.doi.org/10.1108/ijmf-12-2015-0222.

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Purpose The purpose of this paper is to extend the literature on trade receivables and trade payables by examining the determinants of net trade credit. Design/methodology/approach To do that, a sample of 67,047 firms in the UK with 443,190 firm year observations is used. Findings The results are robust to unobserved heterogeneity and industry effects. The evidence suggests that firms with more inventories, market share and are financially distressed invest less in trade credit. Moreover, higher operating cash flow, annual sales growth, export propensity, access to bank credit and larger firms lead to higher investment in trade credit. Originality/value Additionally, the paper broadens the scope of the literature by analysing the determinants of net trade credit around the financial crisis and industry competitiveness.

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Yazdanfar, Darush, and Peter Öhman. "Substitute or complement? The use of trade credit as a financing source among SMEs." Management Research Review 40, no. 1 (January 16, 2017): 10–27. http://dx.doi.org/10.1108/mrr-06-2015-0153.

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Purpose This study aims to investigate trade credit as a financing source among small- and medium-sized enterprises (SMEs), particularly the influence of short-term debt, long-term debt and profitability on the use of such credit. Design/methodology/approach Ordinary least squares (OLS), fixed-effects and generalized method of moments (GMM) system models were used to analyze a large cross-sectional panel data set of 15,897 Swedish SMEs in five industry sectors for the 2009-2012 period. Findings The study provides empirical evidence that long-term debt and profitability each significantly and negatively influence trade credit (i.e. accounts payable) and that short-term debt positively influences trade credit. Notably, while trade credit seems to complement other short-term debt, it replaces long-term debt. Moreover, firm size in terms of sales is positively related and firm age is negatively related to accounts payable. Industry affiliation is another significant explanatory variable. Practical implications The results provide debt holders, potential investors, policymakers and academic researchers with insights into the relationship between trade credit demand, on the one hand, and external financing (i.e. short- and long-term debt) and internal retained earnings (i.e. profit), on the other. From a manager’s perspective, the findings may be important for decision-making regarding trade credit use. Originality/value When investigating trade credit determinants, the literature has seldom distinguished between short- and long-term debt and considered that they may influence the use of trade credit in different ways. The present study adds to the literature by using OLS, fixed-effects and GMM system models to analyze a large cross-sectoral sample in a high-tax country where both bank loans and trade credit are considered important financing instruments.

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Jhang, Shih-Sian (Sherwin), Hung-Chung Su, and Ta-Wei (Daniel) Kao. "Major customer network structure and supplier trade credit." International Journal of Operations & Production Management 41, no. 8 (June 23, 2021): 1318–49. http://dx.doi.org/10.1108/ijopm-05-2020-0278.

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PurposeThis study investigates how a firm's structural embeddedness, the structural position in a supply network that consists of major customers, influences the acquisition of supplier trade credit. Specifically, this study examines how network interconnectedness, network integration and network independence of a firm affect its ability to acquire supplier trade credit.Design/methodology/approachThis study utilizes financial data from Compustat to build a longitudinal dataset of manufacturing firms from 1998 to 2013. Customer segment disclosure data are used to construct firm-level network variables. A fixed effect regression approach is used for estimation.FindingsThe study results show that network interconnectedness is negatively associated with supplier trade credit, while network integration is positively associated with supplier trade credit. Network independence does not influence the extent of supplier trade credit. The post hoc analysis shows that the effects of the hypothesized factors vary under different product categories and credit ratings.Originality/valueThis study broadens the supply chain finance literature by showing how a firm's embedded network structural position can influence its ability to obtain supplier trade credit.

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Aslam, Muhammad, and Rana Tanveer Hussain. "Impact of Trade Credit on Sales Growth: An Empirical Study Based on Cement Sector of Pakistan." Sukkur IBA Journal of Economics and Finance 1, no. 1 (November 30, 2017): 1. http://dx.doi.org/10.30537/sijef.v1i1.128.

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Trade credit management is considered very important in the field of finance for most of the firms. This study throws light on the management of current assets and current liabilities in relation to the trade credit. Trade credit has been a growing source of finance of industrial sector in Pakistan. In this study, the main aim is to analyze the role of trade credit in upgradation of cement sector. To achieve this object, data was taken from the annual financial reports of 17 firms listed cement sector in Pakistan Stock Exchange (PSX). The analyses have been carried out by using the data of 8 years, starting from year 2007 to 2014. Apparently not much work has been done to find out the success or failure of the business units selling cement on credit terms under market conditions prevailing in Pakistan. It was interesting to study the relation of trade credit and sales growth with respect to a developing nation like Pakistan. Panel data (fixed effect) model was used for the estimation of results decided on the basis of Hausman test. In addition to use of trade credit as independent variable, control variables (age, size and lagged sales growth) were also added in the model. Findings of the study show that trade credit has very significant positive affect on sales growth of the firms proclaiming the recommendation for the use of trade credit to enhance the revenues.

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Liu, Bai, Yibo Wang, and Yongyi Shou. "Trade credit in emerging economies: an interorganizational power perspective." Industrial Management & Data Systems 120, no. 4 (March 27, 2020): 768–83. http://dx.doi.org/10.1108/imds-05-2019-0292.

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PurposeThe extant literature recognizes that trade credit is influenced by the power imbalance between buyers and suppliers but most studies focus on either buyer power or supplier power. The purpose of this study is to investigate how buyer power and supplier power interact and jointly influence trade credit. Moreover, this study examines the moderating effects of political ties in an emerging economy context.Design/methodology/approachA research framework was developed by combining resource dependence theory and institutional theory to investigate the interactive effects of market power (i.e. market share and supplier concentration) and non-market power (i.e. political ties) on trade credit. The proposed hypotheses were empirically tested by a fixed effects model using secondary data from 2,433 listed firms in China.FindingsThe results show that a buyer firm's market share promotes trade credit but this effect is weakened by supplier concentration. Moreover, the buyer's political ties enhance the impact of market share on trade credit and attenuate the negative moderating effect of supplier concentration.Originality/valueThis study contributes to the trade credit and supply chain power literature by identifying the interactive effects of market share, supplier concentration and political ties in trade credit. It advances our understanding of how trade credit is jointly determined by a variety of factors in emerging economies.

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Ermakova, E. V. "Trade credit management in wholesale companies based on statistical methods." Statistics and Economics 15, no. 5 (November 13, 2018): 27–39. http://dx.doi.org/10.21686/2500-3925-2018-5-27-39.

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Study purpose. The paper shows the application of statistical methods for the trade credit management in the wholesale Russian companies. In this industry, the companies deal with a huge amount of customers, while trade credit is a common practice. As a result, fast and reasonable choice of trade credit terms becomes especially important for wholesale companies. The main study purpose is to provide the methods to choose the trade credit terms.Materials and methods. In this paper, the methods for trade credit management are based of the empirical research where binomial logistic model and discriminant analysis were used. The binomial logistic model was used to assess the customers’ reliability, his inclination to violate the terms specified in the contract. The delay period must be chosen when trade credit is provided. In the paper, the discriminant analysis was applied to make the decision. The discriminant functions allow choosing such a period of delay that will be broken with the least probability by the customer with certain financial and non-financial characteristics. The data used refer to 11 Russian companies from the wholesale industry and include 720 observations for 2016-2017.Results. As a result, the possibility of due repayment may be evaluated and the payment delay may be selected according to individual customers’ characteristics. Eight factors that characterize the liquidity of the purchaser, its profitability, turnover, and non-financial factors became significant to assess the reliability. In conclusion, the paper contains the practical example for four hypothetical purchasers with different characteristics. The higher the reliability of the customer, the more attractive conditions can be offered for him, depending on the propensity to risk of the wholesale company, as well as its financial opportunities.Conclusion. This article contains the model to evaluate the possibility of due repayment and algorithm to select the payment delay, which are based on the binomial logistic model and classification functions. Although there are a large number of methods to select the terms of trade credit, the majority of them have serious limitations. The most of methods are based only on the professional experience, while statistical analysis, in presence, is based on data of one company because of the confidentiality of necessary information. In contrast, this article is based on the empirical data and includes the delay period selection, which is slightly enlightened in the literature.

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Kumar, Nitin, Arvind Shrivastava, Purnendu Kumar, and M. Ishaq Bhatti. "An Analysis of Trade Credit Behaviour of Indian Firms." South Asia Economic Journal 22, no. 1 (March 2021): 132–54. http://dx.doi.org/10.1177/13915614211009659.

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Trade credit transactions are quite common for businesses. The article carries out the trade credit analysis for an emerging economy, namely Indian corporate sector employing rich information dataset covering multiple industries such as manufacturing, services, construction and others, since the period of financial crisis including both firm specific and macro-economic factors. The annual dataset spans 13 years from 2006 to 2018 covering the crisis period. Applying dynamic panel framework, it is found that the inventory management and macro indicators are significant in determining trade credit for Indian firms. While trade payable is chiefly driven by raw material inventory, firms having reasonable stock of raw or finished goods inventory are less likely to offer trade credit. Large-sized firms are found to be both leading consumers and suppliers of the trade credit. The pecking order theory is clearly validated with net profits being preferred over the trade credit that is a more expensive source of finance. Credit from formal financial sources is found to act as a substitute to trade credit borrowing. JEL: G3, G21, E4, C23

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Han, Xueliang, Xiao Wang, and Huijie Wang. "The inter‐enterprise relationship and trade credit." Nankai Business Review International 4, no. 1 (March 2013): 49–65. http://dx.doi.org/10.1108/20408741311303878.

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Daellenbach, H. G. "Inventory Control and Trade Credit-a Rejoinder." Journal of the Operational Research Society 39, no. 2 (February 1988): 218. http://dx.doi.org/10.2307/2582389.

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Daellenbach, H. G. "Inventory Control and Trade Credit-A Rejoinder." Journal of the Operational Research Society 39, no. 2 (February 1988): 218–19. http://dx.doi.org/10.1057/jors.1988.38.

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Chang, Dong-Han, and Jong-Hyun Park. "Sustainable Management of Trade Insurance Business: Focused on Credit Risk Management." Korea International Trade Research Institute 13, no. 5 (October 30, 2017): 489–508. http://dx.doi.org/10.16980/jitc.13.5.201710.489.

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Zhang, Yi, and Jinwu Gao. "Retailer’s Operational Decision Based on EOQ Model with Upstream Flexible Two-Part Trade Credit and Downstream Partial Trade Credit." Journal of Uncertain Systems 14, no. 01 (March 2021): 2150006. http://dx.doi.org/10.1142/s1752890921500069.

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Flexible two-part trade credit is widely used in supply chain, however, there is scant research about inventory management engaged in flexible two-part trade credit strategy. This paper bridges this gap and studies a new two-level trade credit based on an EOQ model in which the supplier provides flexible two-part trade credit to the retailer and the retailer provides partial trade credit to its customer. We adopt a convex optimization method to obtain retailer’s optimal operational decision (i.e., the optimal ordering cycle, the optimal fraction of purchase cost that paid in advance, and the optimal credit period for its downstream customer). Moreover, we design a numerical algorithm to solve this model computationally. We find that: (1) the retailer is not sensitive to small cash discount provided by the supplier; (2) the length of credit period in flexible two-part trade credit strategy will affect the customer and retailer: the shorter one influences the retailer’s behavior, but not the customer’s; the longer one influences the customer’s behavior, but not the retailer’s; (3) the retailer can control its risk through partial trade credit.

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Hallsworth, Alan G. "Credit Indebtedness and the UK Retail Trade." Service Industries Journal 11, no. 4 (October 1991): 491–96. http://dx.doi.org/10.1080/02642069100000071.

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Lamminmaki, Dawne, and Chris Guilding. "A Study of Australian Trade Credit Management Outsourcing Practices." Australian Accounting Review 14, no. 32 (March 2004): 53–62. http://dx.doi.org/10.1111/j.1835-2561.2004.tb00283.x.

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Rawat, Prof Binny. "A Conceptual Study of Trade Credit Management on SME’s." Global Journal of Commerce & Management Perspective 6, no. 4 (August 30, 2017): 1–15. http://dx.doi.org/10.24105/gjcmp.6.4.1701.

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Tsao, Yu-Chung, Chia-Hung Chen, and Wei-Kuang Teng. "DYNAMIC PROGRAM MODELING FOR A RETAIL SYSTEM UNDER TRADE CREDIT." Journal of the Operations Research Society of Japan 57, no. 1 (2014): 35–44. http://dx.doi.org/10.15807/jorsj.57.35.

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Psillaki, Maria, and Konstantinos Eleftheriou. "Trade Credit, Bank Credit, and Flight to Quality: Evidence from French SMEs." Journal of Small Business Management 53, no. 4 (February 20, 2014): 1219–40. http://dx.doi.org/10.1111/jsbm.12106.

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Xu, Hongkang, Jia Wu, and Mai Dao. "Corporate social responsibility and trade credit." Review of Quantitative Finance and Accounting 54, no. 4 (July 11, 2019): 1389–416. http://dx.doi.org/10.1007/s11156-019-00829-0.

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Harris, Chris, Scott Roark, and Zhe Li. "Cash flow volatility and trade credit in Asia." International Journal of Managerial Finance 15, no. 2 (April 1, 2019): 257–71. http://dx.doi.org/10.1108/ijmf-02-2018-0062.

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PurposeThe purpose of this paper is to identify the relation between cash flow volatility and trade credit offered by firms in developing Asian economies.Design/methodology/approachThe study conducts country fixed effect regressions testing the relationship between cash flow volatility and firm investment in trade credit. The relationship is then examined with all firms separated into two groups based on firm size, and then again comparing the relation before and after the 2008 finasncial crisis.FindingsHigher levels of cash flow volatility are negatively related to the amount of trade credit offered. The negative relationship with cash flow volatility is greater amongst smaller firms that may have less access to external sources of capital. Additionally, the negative relationship is greater following the 2008 financial crisis.Practical implicationsTrade credit plays an important role in the business process, particularly in developing economies. However, these firms may not be able to maintain their investment in trade credit when experiencing greater levels of cash flow volatility. These results are especially pronounced after the 2008 financial crisis and for small firms.Originality/valueThis study identifies an important connection between cash flow volatility and firm investment in trade credit among firms in developing Asian economies.

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Bussoli, Candida, and Francesca Marino. "Trade credit in times of crisis: evidence from European SMEs." Journal of Small Business and Enterprise Development 25, no. 2 (April 9, 2018): 277–93. http://dx.doi.org/10.1108/jsbed-08-2017-0249.

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Purpose The purpose of this paper is to investigate the use of trade credit in a sample of small and medium enterprises in Europe, before and after the outbreak of the subprime financial crisis and the sovereign debt crisis (2006-2013). This study aims to verify whether trade credit is an alternative source of funding compared to other sources of financing. In addition, it tests whether firms that grant extended payment terms to their customers demand delayed accounts payable terms from their suppliers. Design/methodology/approach The empirical analysis is conducted on a sample of European SMEs that were observed over the period immediately before and after the outbreak of the subprime crisis (2008) and the sovereign debt crisis (2010-2011). A panel data analysis is conducted using the generalized method of moment. Findings The results suggest that SMEs with a high probability of insolvency use trade credit more extensively. Distressed and weaker SMEs are less able to match accounts receivable to accounts payable. Finally, the evidence suggests that during the financial crises, the substitution hypothesis is weakened and liquidity shocks are propagated through trade credit channels. Originality/value This study contributes to the extant literature as very few studies have analyzed intercompany financing for European SMEs during periods of financial crisis. The results suggest that supporting trade credit channels, through timely injections of liquidity to companies, could reduce the impact of both financial and intercompany credit crunch on SMEs.

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Pan, Huifeng, Man-Su Kang, and Hong-Youl Ha. "Do trade area grades really affect credit ratings of small businesses? An application of big data." Management Decision 55, no. 9 (October 16, 2017): 2038–52. http://dx.doi.org/10.1108/md-11-2016-0834.

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Purpose Although the study of credit ratings has focused on traditional credit bureau resources, scholars have recently emphasized the importance of big data. The purpose of this paper is to examine both how these data affect the credit evaluations of small businesses and how financial managers use them to stabilize their risks. Design/methodology/approach Using data from 97,889 data points for normal guarantees and 1,678 data points for accidents in public funds, the authors explore the effects of trade area grades as well as the superiority of the use of big data when evaluating credit ratings for small businesses. Findings The results indicate that the grade information of trade areas is useful in predicting accident rates, particularly for small businesses with high credit scores (AAA-A). On the other hand, the accident rates of small businesses with low credit scores increased from 3.15-16.67 to 3.20-33.3 percent. These findings demonstrate that accident rates for the businesses with high credit scores decrease, but accident rates for businesses with low credit scores increase when using the grades of trade areas. Originality/value The authors contribute to the literature in two ways. First, this study provides one of the first investigations on information on trade areas through public financial perspectives, thereby extending the financial risk and retail literature. Second, the current study extends the research on the credit evaluation of small businesses through the big data application of real transaction-based trade areas, answering the call of Park et al. (2012), who recommended an exploration of the relationship between business start-ups and financial risk.

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Mugova, Shame, and Paul R. Sachs. "Corporate governance and credit financing in a developing economy." Corporate Ownership and Control 14, no. 4 (July 2017): 341–49. http://dx.doi.org/10.22495/cocv14i4c2art1.

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Emerging markets have common weaknesses in their financial market development. Financial development is one institutional force that shapes financing and governance of firms in emerging markets. Debt and equity are alternative governance instruments. Trade credit is part of debt and therefore should be treated as such in corporate governance. We used a fixed effect regression of financial sector development and trade credit of firms listed on the Johannesburg Stock Exchange to ascertain the relationship of financial sector development and trade credit. We also analyzed the Socially Responsible Index (SRI) which measures corporate governance. We find that good corporate governance practices do not result in substituting of trade credit, despite its high implicit costs, with bank loans for working capital financing.

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