Tingbani, Ishmael, Afrifa, Godfred Adjapong, Tauringana, Venancio, Ntim, Collins (2022) Trade credit and corporate growth. International Journal of Finance & Economics, 29 (1). pp. 206-228. ISSN 1076-9307. (doi:10.1002/ijfe.2683) (KAR id:97078)
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Official URL: https://doi.org/10.1002/ijfe.2683 |
Abstract
While the underlying causal linkage between trade credit and corporate growth has mainly been explored, the primary factors that channel the relationship are limited. This article hypothesises a nonlinear relationship between trade credit and corporate growth due to the existing theoretical arguments on the benefit and cost of using suppliers' credit by corporations to enhance growth. Based on a panel of 23,023 non-financial companies from the United Kingdom over a 10-year period, evidence from this study reveals a non-linear (concave) relation between trade credit and corporate growth: positive for low trade credit received and negative for high credit received. We also find trade credit to be sensitive to financial crisis, financial constraints and growth strategy. The predictability is stronger during a financial crisis, among financially constrained corporations and corporations pursuing an aggressive growth strategy. We also find growth to be higher in firms that move closer to achieving an optimal credit level. This relationship holds for both the above-and below-optimal deviations. These findings have implications for a more balanced and nuanced view of trade credit management.
Item Type: | Article |
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DOI/Identification number: | 10.1002/ijfe.2683 |
Uncontrolled keywords: | Employment growth, financial constraint, financial crisis and corporate growth, monetary contraction, trade credit, Trade payables |
Subjects: | H Social Sciences > HF Commerce > HF5351 Business |
Divisions: | Divisions > Kent Business School - Division > Department of Accounting and Finance |
Funders: | University of Kent (https://ror.org/00xkeyj56) |
Depositing User: | Godfred Afrifa |
Date Deposited: | 23 Sep 2022 11:45 UTC |
Last Modified: | 01 Feb 2024 16:13 UTC |
Resource URI: | https://kar.kent.ac.uk/id/eprint/97078 (The current URI for this page, for reference purposes) |
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