Trade credit policy: revisiting targeting of trade payable and receivables in BRICS listed firms

Mugova, Shame and Kewnda, Farai (2020) Trade credit policy: revisiting targeting of trade payable and receivables in BRICS listed firms. Eurasian Journal of Economics and Finance, 8 (3). pp. 183-192. ISSN 2148-0192

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The study investigates if firms in BRICS countries pursue a target optimal level of trade credit policy. Trade payables levels may not always at the desired levels and firms take time to adjust from real to target levels. The level of financial sector development may influence firms’ speed and cost adjustment. Employing a dynamic panel data model estimated with the difference and system Generalized Method of Moments estimation techniques on a panel of 3353 listed BRICS non-financial firms, the study established that in pursuit of growth opportunities firms have a deliberate trade credit target levels. Firms pursue a target optimal level of trade payables and trade receivables and firm size affects creditworthiness and access to capital markets, which influences speed of adjustment from current to desired levels of trade payables. Investment in trade receivables require access to capital for additional funding and poorly developed financial sectors makes it costly to adjust towards optimal credit level. Different levels of financial sector development affect access to alternative sources capital which influences optimal trade credit policy.

Item Type: Article
Identification Number:
24 July 2020Accepted
1 September 2020Published Online
Uncontrolled Keywords: Trade Credit, Financial Sector Development, Trade Payables, Trade Receivables
Subjects: CAH17 - business and management > CAH17-01 - business and management > CAH17-01-07 - finance
Divisions: Faculty of Business, Law and Social Sciences > Birmingham City Business School > Centre for Accountancy Finance and Economics
Depositing User: Shame Mugova
Date Deposited: 08 Jan 2024 14:38
Last Modified: 08 Jan 2024 14:42

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