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The influence of economic policy uncertainty on corporate trade credit and firm value

The influence of economic policy uncertainty on corporate trade credit and firm value
The influence of economic policy uncertainty on corporate trade credit and firm value
This research investigates the relationship between government economic policy uncertainty (EPU) and trade credit and its value implication for U.S. public firms. We find that firms curtail their receivables periods and face shorter payables periods from suppliers during high EPU. The impact of trade credit policy changes on firm value is nonlinear. Tightening trade credit during periods of high EPU increases shareholder value only to a certain point, beyond which it is value-destroying since overly reducing trade credit can lead to losing customers to competitors.
Economic policy uncertainty, Firm value, Trade credit
0929-1199
Jory, Surendranath
2624eb24-850a-48f6-b3c6-c96749b87322
Khieu, Hinh
31b244de-cb9b-4cc6-9712-44ccf382c922
Ngo, Thanh
852ea7b9-fd74-4a39-9281-87626e50886b
Phan, Hieu
a4b3ecdc-7529-4c60-9a16-b5ca17385cdf
Jory, Surendranath
2624eb24-850a-48f6-b3c6-c96749b87322
Khieu, Hinh
31b244de-cb9b-4cc6-9712-44ccf382c922
Ngo, Thanh
852ea7b9-fd74-4a39-9281-87626e50886b
Phan, Hieu
a4b3ecdc-7529-4c60-9a16-b5ca17385cdf

Jory, Surendranath, Khieu, Hinh, Ngo, Thanh and Phan, Hieu (2020) The influence of economic policy uncertainty on corporate trade credit and firm value. Journal of Corporate Finance, 64, [101671]. (doi:10.1016/j.jcorpfin.2020.101671).

Record type: Article

Abstract

This research investigates the relationship between government economic policy uncertainty (EPU) and trade credit and its value implication for U.S. public firms. We find that firms curtail their receivables periods and face shorter payables periods from suppliers during high EPU. The impact of trade credit policy changes on firm value is nonlinear. Tightening trade credit during periods of high EPU increases shareholder value only to a certain point, beyond which it is value-destroying since overly reducing trade credit can lead to losing customers to competitors.

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SSRNversion_The Influence of Economic Policy Uncertainty on Corporate Trade Credit and Firm Value - Accepted Manuscript
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More information

Accepted/In Press date: 19 April 2020
e-pub ahead of print date: 16 June 2020
Published date: October 2020
Keywords: Economic policy uncertainty, Firm value, Trade credit

Identifiers

Local EPrints ID: 441819
URI: http://eprints.soton.ac.uk/id/eprint/441819
DOI: doi:10.1016/j.jcorpfin.2020.101671
ISSN: 0929-1199
PURE UUID: be897d53-7351-4f29-844f-72465f80b7be
ORCID for Surendranath Jory: ORCID iD orcid.org/0000-0002-8265-0001

Catalogue record

Date deposited: 29 Jun 2020 16:31
Last modified: 17 Mar 2024 05:40

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Contributors

Author: Surendranath Jory ORCID iD
Author: Hinh Khieu
Author: Thanh Ngo
Author: Hieu Phan

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