Operating Performance and Aggressive Trade Credit Policies

51 Pages Posted: 14 Apr 2016 Last revised: 7 Jan 2018

See all articles by Travis Box

Travis Box

Clemson University

Ryan Davis

University of Alabama at Birmingham

Matthew D. Hill

Arkansas State University

Chris Lawrey

University of South Alabama

Date Written: January 5, 2018

Abstract

We examine the operating performance improvements associated with the extension of trade credit. Our results suggest a positive and significant relation between future profitability and contemporaneous trade credit provision. Further findings indicate significantly higher margins, revenues and market shares for firms that extend more trade credit than industry competitors with similar characteristics, operational necessities and financial distress levels. These inferences are robust to several econometric concerns such as the joint determination of trade credit extension and firm performance. Overall, our results imply that aggressive trade credit policies can provide firm management with a unique channel to improve product market performance.

Keywords: Trade credit; Supplier financing; Working capital; Operating performance

JEL Classification: G31, G32, G39, M49

Suggested Citation

Box, Travis and Davis, Ryan and Hill, Matthew D. and Lawrey, Chris, Operating Performance and Aggressive Trade Credit Policies (January 5, 2018). Available at SSRN: https://ssrn.com/abstract=2763588 or http://dx.doi.org/10.2139/ssrn.2763588

Travis Box (Contact Author)

Clemson University ( email )

101 Sikes Ave
Clemson, SC 29634
United States

Ryan Davis

University of Alabama at Birmingham ( email )

Birmingham, AL 35294
United States

Matthew D. Hill

Arkansas State University ( email )

2713 Pawnee
P.O. Box 1750
Jonesboro, AR 72467-115
United States

Chris Lawrey

University of South Alabama ( email )

307 University Blvd
Mobile, AL 36688
United States

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