A Dynamic Approach to Accounts Receivable: A Study of Spanish SMEs

22 Pages Posted: 4 Jun 2010

Abstract

The main objective of this paper is to extend the literature on the granting of trade credit. The focus is to test whether the accounts receivable decisions follow a model of partial adjustment. To do that, we use a sample of 2,922 Spanish SMEs. Using a dynamic panel data model and employing the GMM method of estimation we control for unobservable heterogeneity and for potential endogeneity problems. The results reveal that firms have a target level of accounts receivable and take decisions in order to achieve that level. In addition, we find that sales growth (if positive), the size of the firms, their capacity to generate internal funds and get short term financing, and economic growth are important in determining trade credit granted by firms.

Suggested Citation

García-Teruel, Pedro J. and Martínez-Solano, Pedro, A Dynamic Approach to Accounts Receivable: A Study of Spanish SMEs. European Financial Management, Vol. 16, No. 3, pp. 400-421, June 2010, Available at SSRN: https://ssrn.com/abstract=1612461 or http://dx.doi.org/10.1111/j.1468-036X.2008.00461.x

Pedro J. García-Teruel (Contact Author)

University of Murcia ( email )

Department of Management and Finance
Murcia, 30100
Spain
34 868887828 (Phone)
34 868887537 (Fax)

HOME PAGE: http://webs.um.es/pjteruel/miwiki/doku.php

Pedro Martínez-Solano

University of Murcia ( email )

Dpt. Management and Finance
Murcia, Murcia 30100
Spain
34 868 883 747 (Phone)
34 868 887 537 (Fax)

HOME PAGE: http://webs.um.es/pmsolano

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