| Article Information |
| Journal: |
Business and Economics Research Journal |
| Title of Article: |
Trade Credit Policies and Shortage of Liquidity in Cycles of Economic Contraction |
| Author(s): |
Bahadir Karakoc |
| Volume: |
12 |
| Number: |
1 |
| Year: |
2021 |
| Page: |
127-144 |
| ISSN: |
2619-9491 |
| DOI Number: |
10.20409/berj.2021.314 |
|
| Abstract |
| This study examines the trade credit practices of 11.000 publicly listed firms from 17 countries (9 developed and 8 developing). The results indicate that firms with a lack of short-term liquidity receive more trade credit for a longer duration. It becomes even more pronounced in times of economic contraction. For robustness, both the period of the 2008 financial crisis and a contractionary period are scrutinized. A slowdown in the economy creates opposing effects on firms from developed and developing countries, while the former use less credit for a shorter period; the latter receive more credit for a longer period of time, whereas firms with a shortage of liquidity behave similarly, i.e., they increase the amount and the duration of trade credit. The findings suggest that firms with a lack of liquidity survive troubling times by obtaining more trade credit from their suppliers. |
| Keywords: |
Trade Credit, Economic Contraction, Cash Management, Alternative Financing Instruments |
|
| JEL Classification: |
G30, G31, G32 |
|
