Trade Credit,Future Earnings,and Stock Returns: A Self-Dealing Perspective

Chinese listed firms are characterized by a great magnitude of long-duration accounts receivable from controlling shareholders and their affiliates, and they often do not make bad debt allowances. On many occasions, these receivables are never collected. We find that firms with a great magnitude of accounts receivable demonstrate a low level of future profitability and low stock returns. It does not appear that the low earnings persistence of these firms is responsible for their poor future performance as predicted by the accrual anomaly, because the firms also report low concurrent earnings. In the context of the Chinese stock market, we interpret the results as being consistent with self-dealing through trade credit by controlling shareholders. This study contributes to the self-dealing literature by identifying a more subtle channel of expropriation of minority shareholders in China.     

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

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.     

The role of factoring for financing small and medium enterprises

Factoring is explicitly linked to the value of a supplier’s accounts receivable and receivables are sold, rather than collateralized, and factored receivables are not part of the estate of a bankrupt firm. Therefore, factoring may allow a high-risk supplier to transfer its credit risk to higher quality buyers. Empirical tests find that factoring is larger in countries with greater economic development and growth and developed credit information bureaus. “Reverse factoring” may mitigate the problem of borrowers’ informational opacity if only receivables from high-quality buyers are factored. We illustrate the case of the Nafin reverse factoring program in Mexico.     

Do firms use the trade credit channel to manage growth?

While many theories of accounts payable and receivable are related to firm performance, there has not been a direct test whether firms actively use them to manage their growth. We argue that it is not just the accounts payable but also the accounts receivable that matter. While the former help to alleviate imperfections in the financial market, the latter do so in the product market. Using over 2.5 million observations for 600.000 firms in 8 euro area countries in the period 1993–2009, we show that firms use the trade credit channel to manage growth. In countries where the trade credit channel is more present, the marginal impact is lower, but the total impact is still higher. Further, firms that are more vulnerable to financial market imperfections, rely more on the trade credit channel to manage growth. Finally, we show that also the overall conditions of the financial market matter for the importance of the trade credit channel for growth.     

Trade credit,cash holdings,and financial deepening: Evidence from a transitional economy

This paper investigates the effect of financial deepening on the relationship between trade credit and cash holdings among Chinese listed firms. We first document an asymmetric effect of trade payables and receivables on cash holdings, in that firms hold an additional $0.71 of cash for every $1 of credit payable but use $1 of receivables as a substitute for only $0.15 of cash. We then find that firms in regions with higher levels of financial deepening hold less cash for payables while substituting more receivables for cash. A more highly developed financial sector helps firms to better use trade credit as a short-term financing instrument. Finally, we find that the ratio at which receivables are substituted for cash increased following the implementation of the new receivables pledge policy in 2007, which allowed firms to use receivables as security for loans. This policy event represents an exogenous shock that mitigates the endogeneity concern.     

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

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.     

Trade credit and company performance during the 2008 financial crisis

We investigate whether the 2008 financial crisis had an impact on companies’ trade credit, and whether changes in trade credit mitigated the crisis’s impact on firm profitability. We document that the availability of trade credit decreased, and that this decline is more pronounced, the higher the companies’ pre‐crisis reliance on short‐term debt. We further report evidence that the redistribution hypothesis holds during crisis periods. Finally, we show that the crisis had a negative impact on company performance, but that this impact was lower (greater) for firms that report an increase in trade receivables (payables) in crisis compared to pre‐crisis periods.     

商业信用与合作型客户关系的构建——基于提供给大客户应收账款的经验证据

利用我国上市公司前5名应收账款欠款人信息以及前5名大客户信息的披露数据,本文较为直接地考察了企业是否以及如何利用应收账款的产品质量担保功能与大客户构建合作型客户关系。研究结果表明,客户集中度越高,企业提供给大客户的信用政策越宽松,即应收账款金额越多,信用期限越长;进一步研究发现,在与主要客户地理位置相似度较低的企业、处于竞争性行业的企业以及营商环境较好的地区,上述两者之间的正相关关系有所增强。最后,本文发现,在与大客户构建合作型客户关系时,企业向这些大客户提供的应收账款越多,企业的业绩越好。     

The influence of economic policy uncertainty on corporate trade credit and firm value

This research investigates the relationship between government economic policy uncertainty (EPU) and trade credit and its value implication for U.S. public firms. We find that firms curtail their receivables periods and face shorter payables periods from suppliers during high EPU. The impact of trade credit policy changes on firm value is nonlinear. Tightening trade credit during periods of high EPU increases shareholder value only to a certain point, beyond which it is value-destroying since overly reducing trade credit can lead to losing customers to competitors.     

企业信用管理制度的创新探析——湖南永利化工股份有限公司企业管理新探索

信用风险和应收帐款管理问题是当前影响企业经营成败的关键因素之一,湖南永利化工股份有限公司通过设立信管理部门、建立客户信息档案、客户资信管理制度、内部授信制度、应收帐款管理制度、帐龄控制制度等,有效地改善了公司应帐款的市场结构和客户结构,提高了资金周转效率,应收帐款的风险大幅度降低,发展、改善了大客户的战略合作关系,在企业管理方面走出了一条新路。     

Economic policy uncertainty and short-term financing: The case of trade credit

We examine the impact of economic policy uncertainty on trade credit. We document a decline (increase) in accounts payable, receivable, and net credit during periods of high (low) policy uncertainty and that firms react quickly to changes in uncertainty. The relation is long-term and holds after controlling for endogeneity, non-policy economic and political uncertainties, and the Great Recession. Industry competitiveness, proxied by firm market power, moderates the impact of economic policy uncertainty on trade credit. Uncertainty about monetary and fiscal policies, taxes, and regulations are the major drivers of trade credit changes. The reduction in trade credit during periods of increasing uncertainty can be explained by financial distress, constraints, and relation-specific investment channels.     

The Determinants of Corporate Trade Credit Policies in a Bank‐dominated Financial Environment: the Case of Finnish Small Firms

This paper examines trade credit policies of small firms operating in a bank‐dominated environment (Finland). We find that creditworthiness and access to capital markets are important determinants of trade credit extended by sellers. The level of purchases is positively correlated with the level of accounts payable. Larger and older firms and firms with strong internal financing are less likely to use trade credit, whereas firms with a high ratio of current assets to total assets, and firms subject to loan restructurings use it more. Negative loan decisions by financial intermediaries increase and a close bank‐borrower relationship decreases the probability that a firm does not take advantage of trade credit discounts.     

Shareholder Returns from Supplying Trade Credit

We examine shareholder wealth implications of supplying financing to customers. Robust results suggest that excess returns and changes in trade receivables are directly and significantly related. Further evidence indicates the value of receivables is higher for suppliers with stronger motives relating to operating and contracting costs. The results also suggest a discounted value of receivables for financially unconstrained firms. Overall, we conclude that investors recognize trade credit as an effective instrument in mitigating frictions hindering sales growth. Thus, certain suppliers are positioned to derive increased strategic benefits from credit policy.     

Downstream Value of Upstream Finance

We examine market value implications of managing liquidity via supplier financing. Results suggest a direct link between shareholder wealth and use of trade credit, and the relation exhibits significant cross‐sectional variation. In particular, the market value of trade credit varies with the liquidity of goods sold and competition in product markets. Evidence also indicates the value‐supplier financing association strengthens with financial constraint, which supports the financing motive for trade credit. Further findings are consistent with the transaction cost motive. Overall, we conclude that shareholders value the strategic benefits associated with supplier financing and that downstream firms’ characteristics influence this value.     

论科研单位应收帐款融资

科研单位经常遇到应收帐款收回不及时或无法收回的现象，不仅占用了企业流动资金，还增加了企业管理成本和坏帐成本，严重制约了企业的生存和发展。分析了我国科研单位应收账款管理中存在的主要问题，开展应收账款融资的现实意义，在此基础上提出我国科研单位应收账款融资的方式选择。     

Trade Credit,the Financial Crisis,and SME Access to Finance

Mounting evidence indicates that firms, particularly SMEs, suffered from a significant credit crunch during this crisis. We analyze for the first time whether trade credit provided an alternative source of external finance to SMEs during the crisis. Using firm‐level Spanish data we find that credit constrained SMEs depend on trade credit, but not bank loans, and that the intensity of this dependence increased during the financial crisis. Unconstrained firms, in contrast, are dependent on bank loans but not on trade credit.     

Product differentiation,market dynamics and the value relevance of trade payables: Evidence from UK listed firms

This paper provides a comprehensive evidence on how product and market dynamics affect the value relevance of trade payables. Using a sample of 2559 UK listed firms over the period 2005–2014, we find a positive relationship between trade payables and firm performance. Our evidence suggests that trade payables increase (decrease) performance in firms with differentiated products and demand uncertainty (larger market share). We demonstrate that the relative value relevance of bank credit versus suppliers’ credit is dependent on the nature of the product, the level of sales volatility, and market share. We use an innovative approach to assess the robustness of our results to omitted variable bias.     

CREDIT SPREADS AND THE ZERO‐COUPON TREASURY SPOT CURVE

We examine the relation between credit spreads on industrial bonds and the underlying Treasury term structure. We use zero‐coupon spot rates to eliminate the coupon bias and to allow for a consistent study both within and across the different credit ratings. Our results indicate that the level and slope of the Treasury term structure are negatively correlated with changes in the credit spread on investment‐grade corporate bonds. We also find that the relation between credit spreads and the Treasury term structure is relatively stable through time. This is good news for value‐at‐risk calculations, as this suggests that the correlations among assets of different credit classes are stable; therefore use of historic correlations to model spread relations can be valid.     

Bank Loan Availability and Trade Credit Demand

This paper investigates the effects of bank loan availability on the trade credit and credit card demand of small firms, using firm‐level data from the 1995 Credit, Banks, and Small Business Survey, conducted by the National Federation of Independent Business. We find that firms increase their demand for trade credit and credit card debt when facing credit constraints imposed by banks. These results provide evidence of a pecking order of debt financing, where firms increase their reliance on potentially expensive sources of funds when bank loans are not available.     

Trade Receivables Policy of Distressed Firms and Its Effect on the Costs of Financial Distress

This paper studies the trade receivables policy of distressed firms as the trade-off between the firm's willingness to gain sales and the firm's need for cash. We find that firms increase trade receivables when they have profitability problems, but reduce trade receivables when they have cash flow problems. We also find that a firm that significantly cuts its trade receivables when in financial distress will experience an additional drop of at least 13% in sales and stock returns over the previously documented 20% average drop for financially troubled firms. Moreover, the performance decline of a firm in financial distress is significantly higher if the firm cuts trade receivables than if it does not.