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- Title
Short-term credit policies and operating performance.
- Authors
Afrifa, Godfred Adjapong; Tingbani, Ishmael; Alshehabi, Ahmad; Halabi, Hussein
- Abstract
Using a sample of United Kingdom (UK) non-financial firms from 2009 to 2021, this paper examines the operating performance effect of aggressive and moderate use of trade payables and bank credit. The results demonstrate a hierarchical effect of the use of short-term credit on firms operating performance. In particular, the results show that aggressive use of bank credit achieves higher operating performance, followed by moderate use of trade payables and bank credit and then aggressive use of trade payables. We further document that operating performance of firms dealing in differentiated products, lower firm size, firms with higher market power and financially stable firms' increases with aggressive and moderate use of trade payables and bank credit. Overall, the results indicate that firm operating performance is an increasing function of bank credit use and demonstrate the importance of short-term credit policies on firms' operating performance. The results are robust after using a novel approach in addressing the issue of endogeneity.
- Subjects
UNITED Kingdom; CREDIT control; BANK loans; BUSINESS size; ORGANIZATIONAL performance; MARKET power
- Publication
Review of Quantitative Finance & Accounting, 2024, Vol 62, Issue 4, p1755
- ISSN
0924-865X
- Publication type
Article
- DOI
10.1007/s11156-024-01249-5