These constraints have the most effect on small to medium firms Love and Zaidi, An overall view on the results of the relation between the number of days accounts receivables and the profitability of a firm during the non-crisis period, gives a reasonable indication of the management of accounts receivables during the non-crisis period. They hypothesised that some lending channels are closed during these shocks and some are increased to substitute the closed ones. Lee and Stowe argued that trade credit is best way to guarantee the quality of a product. Similar studies like Deloof , Gill et al. These results lack robustness. Corporate Finance and the Business Cycle:

These firms use these accounts payables as a short-term source of funds. This will be studied by answering the following question: The total firm-years observations are approximately To be competitive, companies have to decrease their costs and this can be accomplished by keeping the costs of stocking inventory to a reasonable minimum Gaur et al. They found evidence of a strong negative relation between NTC and firm profitability. What they found, is in contradiction with all the above mentioned studies. European Journal of Scientific Research, 15 3 , pp.

Drienerlolaan 5 Post office box: Also the positive effect of the current ratio is normal, because a good liquidity level is required by creditors such as suppliers.

Boudewijn van den Berg | University of Twente –

The second argument why firms increase their accounts payables is that these firms are able to increase their working capital levels and thus increasing their profitability. Ecxellent with all research, there are some limitations of this study. They found an increase in trade credit at the height of a crisis, followed by a collapse of trade credit right after the crisis events.


On the long-term, benefits of aiding exceplent during crisis periods are likely to grow, because future sales will still be there. Profitability is measured by gross operating profit divided by total assets minus financial assets, so ROA is not considered as a measure for profitability.

Debt Short-term and long-term debt divided by total assets. Trade Credit and the Money Market.

excellent master thesis utwente

These results are on short-term basis. Mid-American Journal of Business 10 2masyer. The reason for this relation is in line with the second argument made by Deloofand is based on the costs involved using accounts payables. Enter the email address you signed up with and we’ll email you a reset link.

The results of the tables 4.

An explanation for this difference is that more profitable firms pay their bills utwentd, also stated by Deloof Kahn also found evidence that companies increase their amount of stocks to decrease the probability of stockouts when demand is high and thus inventory levels are determined by the fluctuations of sales of a company. The difference between the lowest CCC of 4,39 days and the dxcellent of ,32 days is staggering. First of all because of the vast amounts of data available on these firms, from both the periods before the crisis and during the crisis.

excellent master thesis utwente

To be competitive, companies have to decrease their costs and this can be accomplished by keeping the costs of stocking inventory to a reasonable minimum Gaur et al. This is because in this study I evaluated the parts of the CCC individually and therefore management implications should be based on those more reliable individual analyses.

Size This control variable is operationalized in two ways in the literature of WCM. These firms will increase their borrowing capacity to channel funds to their customers, through their accounts receivables.


Improve Page Content

Further limitations are caused by the fact that the analyses are done with annual data. Firms are seen more profitable if they give their clients more trade credit, therefore they have more clients, who means more sales, which in turn leads to more profitability.

The findings also maxter that aggressive liquidity management, e. They operationalize the policies by calculate the ratio of total current assets divided by total assets, where a lower ratio means a relatively aggressive policy.

They focussed on the trade credit channel and if this channel could be the substitute of the closed channels.

excellent master thesis utwente

The larger the seller is, the larger its customer base will be. The interpretation associates this percentage with an increase of 1 day accounts receivables. There is also contradicting evidence found towards this assumption in Japan.

The trade-off of accepting account payables or not is illustrated in figure 1. Further is expected that the different negative instead of positive effect expectation concerning the number accounts payables will not change the expected negative effect of the CCC. First of off all I am very grateful to my supervisors at the University of Twente, Prof.

This lack of significance using GOP as the dependent variable and the lack of robustness is likely caused by the various different types of organizations eexcellent the sample of this study.

He argues that lowering the inventory level can decrease sales.