Short-term credit policies and operating performance

Afrifa, Godfred, Tingbani, Ishmael, Alshehabi, Ahmad and Halabi, Hussein 2024. Short-term credit policies and operating performance. Review of Quantitative Finance and Accounting 62 , pp. 1755-1709. 10.1007/s11156-024-01249-5 Item availability restricted.

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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.

Item Type:	Article
Date Type:	Publication
Status:	Published
Schools:	Business (Including Economics)
Publisher:	Springer
ISSN:	0924-865X
Date of First Compliant Deposit:	19 January 2024
Date of Acceptance:	15 January 2024
Last Modified:	10 Nov 2024 14:30
URI:	https://orca.cardiff.ac.uk/id/eprint/165604

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