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Petty cash from parents: Provision of liquidity to spin-offs by trade credit channel

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  • Kazuo Yamada
  • Yuji Honjo

Abstract

This study shows that spin-offs acquire liquidity from their parent firms through the trade credit channel. We find that the accounts receivable of spin-offs with parent customers are lower than those of others, while the accounts payable of spin-offs with parent suppliers are higher than those of others. This supports the view that parent firms provide the liquidity of spin-offs through trade credit. Moreover, we find that spin-offs are more likely to increase accounts payable, regardless of whether the parent firms are major customers or suppliers. This is consistent with the view that the presence of parent firms plays a role in the certification of spin-offs.

Suggested Citation

  • Kazuo Yamada & Yuji Honjo, 2020. "Petty cash from parents: Provision of liquidity to spin-offs by trade credit channel," Journal of Small Business Management, Taylor & Francis Journals, vol. 58(5), pages 923-947, September.
    • Handle: RePEc:taf:ujbmxx:v:58:y:2020:i:5:p:923-947
    DOI: 10.1111/jsbm.12538
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