The impact of firms' specific factors on credit policy: evidence from Indonesia listed manufacturing firms 2008-2012
Previous studies about the impact of firm specific factors on trade credit show inconsistent results. These findings inspire the author to conduct a research on similar topic. This study empirically investigates the determinants of credit policy. Specifically, this study tries to measure the impact of firms? specific factors such as inventory investment, cost of holding inventory, firms? profitability, firms? Liquidity, and firms? size on the amount of trade credit extended. The samples used are 143 firms that are listed in Indonesia Stock Exchange from 2008 to 2012. Panel data regression method is performed using STATA 11. The findings suggest that, cost of holding and firms? size have a negative impact on credit extended, whereas profitability, level of inventories, and liquidity have a positive impact on credit extended. Although lower inventories are often associated with higher efficiency level, the result suggests that having too low inventory leads to lost selling opportunity. Furthermore, the result shows that profitable and liquid firms and Small and Medium Enterprises are the ones who often use trade receivable.
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