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A dynamic approach to accounts receivable: the case of Jordanian firms

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  • Ala’a Adden Abuhommous

    (Business School, Mutah University)

  • Tareq Mashoka

    (Business School, Mutah University)

Abstract

This paper studies the trade credit policy of firms for a sample of Jordanian listed firms in the period 2000–2014. In addition, this paper tests whether the accounts receivable decisions follow a model of partial adjustment. The generalized methods of moments estimation results suggest that firms have a target accounts receivable level and move toward this target quickly. In addition, we find that short term finance, internal cash flow, positive sales growth, product quality, and profitability are playing an important role in the trade credit policy. The study recommends that firms must pay attention to their relationship with customers because they represent an important investment opportunity. Furthermore, firms should maintain close relationships with banks because it influences their trade credit policy.

Suggested Citation

  • Ala’a Adden Abuhommous & Tareq Mashoka, 2018. "A dynamic approach to accounts receivable: the case of Jordanian firms," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 8(2), pages 171-191, June.
    • Handle: RePEc:spr:eurasi:v:8:y:2018:i:2:d:10.1007_s40821-017-0074-8
    DOI: 10.1007/s40821-017-0074-8
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