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 language | English |
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Article number | 101685 |
Number of pages | 46 |
Journal | Journal of Corporate Finance |
Volume | 64 |
Early online date | 15 Jul 2020 |
DOIs | |
Publication status | Published - Oct 2020 |
Bibliographical note
Funding Information:We thank Douglas Cumming (Editor), three anonymous reviewers, 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. All errors are our own.
Funding Information:
We thank Douglas Cumming (Editor), three anonymous reviewers, 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. All errors are our own.
Publisher Copyright:
© 2020 The Author(s)
Keywords
- trade credit
- peer effects
- product market competition
- Trade credit
- Product market competition
- Peer effects
- BANK
- CAPITAL STRUCTURE DECISIONS
- PERFORMANCE
- ASYMMETRIC INFORMATION
- IDENTIFICATION
- POLICY
- COSTS
- DISCLOSURE
- FINANCE
- INVESTMENT