Firm life cycle and trade credit

This study investigates the relation between firm life cycle and trade credit. We find evidence that firms in the introduction, growth, and decline stages use significantly more trade credit, whereas firms in the mature stage use significantly less trade credit. Firm life cycle works as a separate c...

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Bibliographic Details
Published in:	The Financial review (Buffalo, N.Y.) Vol. 56; no. 4; pp. 743 - 771
Main Authors:	Hasan, Mostafa Monzur, Cheung, Adrian (Wai‐Kong), Tunas, Lidia, Kot, Hung Wan
Format:	Journal Article
Language:	English
Published:	Knoxville Blackwell Publishing Ltd 01-11-2021
Subjects:	Business cycles Commercial credit financing constraints firm life cycle Life cycles profitability trade credit
Online Access:	Get full text
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Summary:	This study investigates the relation between firm life cycle and trade credit. We find evidence that firms in the introduction, growth, and decline stages use significantly more trade credit, whereas firms in the mature stage use significantly less trade credit. Firm life cycle works as a separate channel to affect trade credit independently from other channels proposed in the literature. These results are robust to alternative regression specifications, alternative measures of life cycle and trade credit, and the endogeneity concern. Firms in the introduction and decline stages adjust trade credit to the target level quickly compared to others.
ISSN:	0732-8516 1540-6288
DOI:	10.1111/fire.12264