Determining the effects of trade credit on firm growth: a panel analysis of 1612 firms in 5 emerging economies
Since the works of Modigliani and Miller there has been extensive study on the impact of formal debt on firm value. However, there has been relatively less research on the effects of trade credit on firm growth, which is also considered an important source of financing. I argue that trade credit is...
| Main Author: | |
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| Format: | Dissertation (University of Nottingham only) |
| Language: | English |
| Published: |
2018
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| Online Access: | https://eprints.nottingham.ac.uk/53745/ |
| _version_ | 1848798982273236992 |
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| author | Teo, Imrann Qwang Loong |
| author_facet | Teo, Imrann Qwang Loong |
| author_sort | Teo, Imrann Qwang Loong |
| building | Nottingham Research Data Repository |
| collection | Online Access |
| description | Since the works of Modigliani and Miller there has been extensive study on the impact of formal debt on firm value. However, there has been relatively less research on the effects of trade credit on firm growth, which is also considered an important source of financing. I argue that trade credit is an important channel for managing growth for firms in emerging economies, which may have less developed financial sectors. Specifically, this thesis aims to expand the literature concerning trade credit and determine its impact on firm growth for emerging economies in Southeast Asia. The sample comprised of 1612 firms across 5 years (2012-2016) with monthly samples, and across 5 developing economies in Southeast Asia: Indonesia, Malaysia, Philippines, Thailand and Vietnam (96,720 monthly observations in total). I used both ordinary least squares and generalized method-of-moments estimation methods for my panel regression model to determine the relationship between trade credit and firm growth. The model also includes several control variables (firm size, long-term debt and firm profitability).
I successfully answer the main research question and show that trade credit is an important factor for improving firm growth in emerging economies. Both accounts payable and accounts receivable had significant positive effects on firm growth. When the results from all the countries are combined, they show on average that for every 1% increase in accounts payable, there is a 0.04% increase in firm growth using GMM estimation and a 0.02% increase using OLS estimation. Similarly, for every 1% increase in account receivable, there is a 0.06% increase in firm growth using GMM estimation and a 0.04% increase using OLS estimation. With these results, I recommend that government policymakers and firm managers consider using trade credit as an instrument to boost firm growth. Future research might consider samples from different regions, increasing sample size, or testing with other variables, such as firm profitability. Categorization can also be applied such as sorting firms by size. |
| first_indexed | 2025-11-14T20:28:25Z |
| format | Dissertation (University of Nottingham only) |
| id | nottingham-53745 |
| institution | University of Nottingham Malaysia Campus |
| institution_category | Local University |
| language | English |
| last_indexed | 2025-11-14T20:28:25Z |
| publishDate | 2018 |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | nottingham-537452020-05-07T16:46:00Z https://eprints.nottingham.ac.uk/53745/ Determining the effects of trade credit on firm growth: a panel analysis of 1612 firms in 5 emerging economies Teo, Imrann Qwang Loong Since the works of Modigliani and Miller there has been extensive study on the impact of formal debt on firm value. However, there has been relatively less research on the effects of trade credit on firm growth, which is also considered an important source of financing. I argue that trade credit is an important channel for managing growth for firms in emerging economies, which may have less developed financial sectors. Specifically, this thesis aims to expand the literature concerning trade credit and determine its impact on firm growth for emerging economies in Southeast Asia. The sample comprised of 1612 firms across 5 years (2012-2016) with monthly samples, and across 5 developing economies in Southeast Asia: Indonesia, Malaysia, Philippines, Thailand and Vietnam (96,720 monthly observations in total). I used both ordinary least squares and generalized method-of-moments estimation methods for my panel regression model to determine the relationship between trade credit and firm growth. The model also includes several control variables (firm size, long-term debt and firm profitability). I successfully answer the main research question and show that trade credit is an important factor for improving firm growth in emerging economies. Both accounts payable and accounts receivable had significant positive effects on firm growth. When the results from all the countries are combined, they show on average that for every 1% increase in accounts payable, there is a 0.04% increase in firm growth using GMM estimation and a 0.02% increase using OLS estimation. Similarly, for every 1% increase in account receivable, there is a 0.06% increase in firm growth using GMM estimation and a 0.04% increase using OLS estimation. With these results, I recommend that government policymakers and firm managers consider using trade credit as an instrument to boost firm growth. Future research might consider samples from different regions, increasing sample size, or testing with other variables, such as firm profitability. Categorization can also be applied such as sorting firms by size. 2018-02-24 Dissertation (University of Nottingham only) NonPeerReviewed application/pdf en https://eprints.nottingham.ac.uk/53745/1/53745-Imrann%20Teo.pdf Teo, Imrann Qwang Loong (2018) Determining the effects of trade credit on firm growth: a panel analysis of 1612 firms in 5 emerging economies. [Dissertation (University of Nottingham only)] |
| spellingShingle | Teo, Imrann Qwang Loong Determining the effects of trade credit on firm growth: a panel analysis of 1612 firms in 5 emerging economies |
| title | Determining the effects of trade credit on firm growth: a panel analysis of 1612 firms in 5 emerging economies |
| title_full | Determining the effects of trade credit on firm growth: a panel analysis of 1612 firms in 5 emerging economies |
| title_fullStr | Determining the effects of trade credit on firm growth: a panel analysis of 1612 firms in 5 emerging economies |
| title_full_unstemmed | Determining the effects of trade credit on firm growth: a panel analysis of 1612 firms in 5 emerging economies |
| title_short | Determining the effects of trade credit on firm growth: a panel analysis of 1612 firms in 5 emerging economies |
| title_sort | determining the effects of trade credit on firm growth: a panel analysis of 1612 firms in 5 emerging economies |
| url | https://eprints.nottingham.ac.uk/53745/ |