Title

Shareholder Returns from Supplying Trade Credit

Document Type

Article

Publication Date

3-1-2012

Department

Finance, Real Estate, and Business Law

Abstract

We examine shareholder wealth implications of supplying financing to customers. Robust results suggest that excess returns and changes in trade receivables are directly and significantly related. Further evidence indicates the value of receivables is higher for suppliers with stronger motives relating to operating and contracting costs. The results also suggest a discounted value of receivables for financially unconstrained firms. Overall, we conclude that investors recognize trade credit as an effective instrument in mitigating frictions hindering sales growth. Thus, certain suppliers are positioned to derive increased strategic benefits from credit policy.

Publication Title

Financial Management

Volume

41

Issue

1

First Page

255

Last Page

280