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Does Trade Credit Spur Firm Performance? A Case Study in Vietnam

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  • Quoc Viet Pham
  • Tran Quang Phuc Pham

Abstract

Purpose: The paper aims to examine the impacts of trade credit on firm performance in Vietnam, representing a small transition economy with high openness environment. Design/Methodology/Aproach: Generalized least squares method of estimation was used to test the hypotheses on a sample of 279 companies listed on Ho Chi Minh City Stock Exchange (HOSE) during the 2012-2018 period, after the global financial crisis. Findings: The research findings support the positive influences of trade credit on firm performance of large businesses through both accounts receivable and trade payables and reversal effects on small business. These results show the advantages of large-scale companies own over the smaller ones in acquiring financing resources and imposing market power on their business partners, which help them optimize the benefits of trade credit. Practical implications: Research results indicate that corporates should increase their business scale to capitalize on the benefits of trade credit, and small-scale businesses should control the cost of trade credit. Originality/Value: The paper contributes to the literature in three main ways. Firstly, our exclusive offers new insights into understanding the behavior of Vietnamese firms, and this would give implications for transition economies in the world. Secondly, the study was carried out in the post-crisis period, with regulatory changes in banking management. Thirdly, this research compensates for the lack of empirical evidence in this field of research.

Suggested Citation

  • Quoc Viet Pham & Tran Quang Phuc Pham, 2020. "Does Trade Credit Spur Firm Performance? A Case Study in Vietnam," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(3), pages 215-227.
    • Handle: RePEc:ers:ijebaa:v:viii:y:2020:i:3:p:215-227
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    References listed on IDEAS

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    More about this item

    Keywords

    Trade credit; firm performance; accounts receivable; trade payables.;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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