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Net trade credit: what are the determinants?

Godfred Adjapong Afrifa (The Business School, Canterbury Christ Church University, Canterbury, UK)
Ernest Gyapong (Accountancy, Massey University, Palmerston North, New Zealand)

International Journal of Managerial Finance

ISSN: 1743-9132

Article publication date: 5 June 2017

Abstract

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.

Keywords

Citation

Afrifa, G.A. and Gyapong, E. (2017), "Net trade credit: what are the determinants?", International Journal of Managerial Finance, Vol. 13 No. 3, pp. 246-266. https://doi.org/10.1108/IJMF-12-2015-0222

Publisher

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Emerald Publishing Limited

Copyright © 2017, Emerald Publishing Limited