Corporate trade credit and inventories: New evidence of a tradeoff from accounts payable and receivable

9 Pages Posted: 20 Dec 2023

See all articles by Spiros Bougheas

Spiros Bougheas

University of Nottingham - School of Economics

Simona Mateut

Nottingham University Business School

Paul Mizen

University of Nottingham; Bank of England; Centre for Economic Policy Research (CEPR)

Date Written: December 19, 2023

Abstract

Trade credit is an important source of finance for firms and has been well researched, but the focus has been on financial trade-offs. In this paper, we consider the trade-offs with inventories and develop a simple model that recognizes the incentives a firm faces to offer and receive trade credit. Our model identifies the response of accounts payable and accounts receivable to changes in the cost of inventories, profitability, risk and liquidity, and importantly, this influence operates through a production channel. Our results support the model and complement many existing studies focused on explaining the financial terms of trade credit.

Keywords: Trade credit, Inventories

JEL Classification: G31, G32

Suggested Citation

Bougheas, Spiros and Mateut, Simona and Mizen, Paul, Corporate trade credit and inventories: New evidence of a tradeoff from accounts payable and receivable (December 19, 2023). Journal of Banking and Finance, Vol. 33, No. 2, 2009, Available at SSRN: https://ssrn.com/abstract=4669198

Spiros Bougheas (Contact Author)

University of Nottingham - School of Economics ( email )

University Park
Nottingham, NG7 2RD
United Kingdom

Simona Mateut

Nottingham University Business School ( email )

Jubilee Campus
Wollaton Road
Nottingham, NG8 1BB
United Kingdom

Paul Mizen

University of Nottingham ( email )

University Park
Nottingham, NG8 1BB
United Kingdom
+44 115 951 5479 (Phone)
+44 115 951 4159 (Fax)

Bank of England

Threadneedle Street
London, EC2R 8AH
United Kingdom

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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