Peer influence on trade credit

Daniel Gymiah, Michael Machokoto, Anywhere Sikochi*

*Corresponding author for this work

Research output: Contribution to JournalArticlepeer-review

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 operate in highly competitive product markets and an uncertain information environment. Our results show that firms not only mimic peers in similar circumstances but also imitate their more and less successful peers. We find that the benefits of mimicking peers' trade credit policies increase initially, but for 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 of selecting peers, sampling, different proxies, and estimation techniques.
Original languageEnglish
Pages (from-to)1-58
Number of pages58
JournalJournal of Corporate Finance
Volume64
Early online date4 Jul 2020
DOIs
Publication statusE-pub ahead of print - 4 Jul 2020

Keywords

  • Trade credit
  • Peer effects
  • Product market competition

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