Peer influence on trade credit

Daniel Gyimah, Michael Machokoto, Anywhere (Siko) Sikochi

Research output: Contribution to journalArticlepeer-review

33 Citations (Scopus)
1 Downloads (Pure)

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
Article number101685
Number of pages46
JournalJournal of Corporate Finance
Volume64
Early online date15 Jul 2020
DOIs
Publication statusPublished - 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

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