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A Dynamic Approach to Accounts Receivable: a Study of Spanish SMEs

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  • Pedro J. García†Teruel
  • Pedro Martínez†Solano

Abstract

The main objective of this paper is to extend the literature on the granting of trade credit. The focus is to test whether the accounts receivable decisions follow a model of partial adjustment. To do that, we use a sample of 2,922 Spanish SMEs. Using a dynamic panel data model and employing the GMM method of estimation we control for unobservable heterogeneity and for potential endogeneity problems. The results reveal that firms have a target level of accounts receivable and take decisions in order to achieve that level. In addition, we find that sales growth (if positive), the size of the firms, their capacity to generate internal funds and get short term financing, and economic growth are important in determining trade credit granted by firms.

Suggested Citation

  • Pedro J. García†Teruel & Pedro Martínez†Solano, 2010. "A Dynamic Approach to Accounts Receivable: a Study of Spanish SMEs," European Financial Management, European Financial Management Association, vol. 16(3), pages 400-421, June.
  • Handle: RePEc:bla:eufman:v:16:y:2010:i:3:p:400-421
    DOI: 10.1111/j.1468-036X.2008.00461.x
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    File URL: https://doi.org/10.1111/j.1468-036X.2008.00461.x
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    Cited by:

    1. Masahiro Enomoto, 2018. "The Effect of Corporate Governance on the Relationship between Accounting Quality and Trade Credit: Evidence from Japan," Discussion Paper Series DP2018-12, Research Institute for Economics & Business Administration, Kobe University, revised Feb 2020.
    2. Abdulla, Yomna & Dang, Viet Anh & Khurshed, Arif, 2020. "Suppliers' listing status and trade credit provision," Journal of Corporate Finance, Elsevier, vol. 60(C).
    3. Montserrat Manzaneque-Lizano & Esteban Alfaro-Cortés & Alba María Priego de la Cruz, 2019. "Stakeholders and Long-Term Sustainability of SMEs. Who Really Matters in Crisis Contexts, and When," Sustainability, MDPI, Open Access Journal, vol. 11(23), pages 1-27, November.

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