Journal Pre-proof - ResearchGate › Peer-Influence-on-Trade-Credit › Peer-Influence-on-Trade-CreditJun 24, 2020 — We examine the influence of peer firms on trade credit policies of ... credit using the econometric model in Section 5, and account for the im
Daniel Gyimah, Michael Machokoto, Anywhere (Siko) Sikochi PII:
S0929-1199(20)30129-2
DOI:
https://doi.org/10.1016/j.jcorpfin.2020.101685
Reference:
CORFIN 101685
To appear in:
Journal of Corporate Finance
Received date:
2 November 2018
Revised date:
24 June 2020
Accepted date:
25 June 2020
Please cite this article as: D. Gyimah, M. Machokoto and A.(. Sikochi, Peer influence on trade credit, Journal of Corporate Finance (2020), https://doi.org/10.1016/ j.jcorpfin.2020.101685
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© 2020 Published by Elsevier.
Journal Pre-proof
Peer Influence on Trade Credit* Daniel Gyimah† University of Aberdeen, United Kingdom
Michael Machokoto‡ The University of Northampton, United Kingdom
Anywhere (Siko) Sikochi§
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Abstract
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July 2, 2020
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Harvard University, United States
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We examine the influence of peer firms on trade credit policies of listed firms in the United States. We posit and find evidence that firms mimic their peers in formulating trade credit policies. The
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findings are more pronounced for firms that operate in highly competitive product markets and an uncertain information environment. Our results show that firms not only mimic peers in similar
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circumstances but also imitate their more and less successful peer firms. We find that the benefits of mimicking peers’ trade credit policies increase initially, but for firms that already maintain high
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levels of trade credit, these benefits diminish faster as the intensity of mimicking increases. Our results are robust to different methods of selecting peers, sampling, different proxies, and
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estimation techniques.
We thank Thaana Ghalia, Lanre Kassim, Michael Kimbrough, Stephani Mason, Kwaku Opong, Christopher Palmer,
Thomas Ruchti, Suraj Srinivasan, and Chris Veld for useful comments. We also thank seminar participants at the University of Northampton, Coventry University, University of Aberdeen, Harvard Business School, and Carnegie Mellon University Summer Conference. We thank the University of Aberdeen, Harvard Business School, and University of Northampton for financial support. †
Business School, University of Aberdeen, Dunbar Street, Aberdeen, AB24 3QY, Scotland, United Kingdom, Email:
[email protected], Tel: +44 122 427 2210 ‡
Faculty of Business and Law, University of Northampton, Boughton Green Road, Northampton, NN2 7AL, United
Kingdom, Email:
[email protected], Tel: +44 160 489 3484 §
Corresponding author; Harvard Business School, Harvard University, Morgan Hall, Boston, MA, 02163, United
States, Email:
[email protected], Tel: +1 617 496 3756
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Keywords: Trade credit, Peer effects, Product market competition.
JEL classification: C31, D22, G32
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Declarations of interest: none
Journal Pre-proof
Peer Influence on Trade Credit June 24, 2020
Abstract We examine the influence of peer firms on trade credit policies of listed firms in the United States. We posit and find evidence that firms mimic their peers in formulating trade credit policies. The findings are more pronounced for firms that
of
operate in highly competitive product markets and an uncertain information
ro
environment. Our results show that firms not only mimic peers in similar circumstances but also imitate their more and less successful peer firms. We find
-p
that the benefits of mimicking peers’ trade credit policies increase initially, but for
re
firms that already maintain high levels of trade credit, these benefits diminish faster as the intensity of mimicking increases. Our results are robust to different methods
lP
of selecting peers, sampling, different proxies, and estimation techniques.
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Keywords: Trade credit, Peer effects, Product market competition.
ur
JEL classification: C31, D22, G32
1
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Declarations of interest: none
Introduction
Trade credit is the most important source of short-term financing for firms in the United States (Petersen and Rajan, 1997; Barrot, 2016) and is responsible for global trade in excess of US$25 trillion (Klapper et al., 2012). Non-financial and non-utility firms are the largest providers of trade credit, and in particular, can be a natural source of capital to younger and developing firms (Cosh et al., 2009). Given the economic impact of trade credit, the question of why non-financial and non-utility firms extend trade credit when more specialized financial institutions could finance trade is the subject of a growing body of literature (e.g. Peterse
