A Dynamic Approach to Accounts Receivable: a Study of Spanish SMEs |
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Authors: | Pedro J García‐Teruel Pedro Martínez‐Solano |
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Institution: | 1. Department of Management and Finance, Faculty of Economics and Business, University of Murcia, Murcia, SpainE‐mail: pjteruel@um.es;2. pmsolano@um.es |
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Abstract: | 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. |
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Keywords: | accounts receivable trade credit SMEs partial adjustment model endogeneity G31 G32 |
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