Predatory trade finance: the impact of bargaining power and financing constraints on the demand and supply of trade credit

Figures & data

Table 1. Descriptive statistics

Variable	Mean	Median	St. Deviation
Total Assets	231,198.470	40,013.350	769,482.600
Receivables/Assets	0.2320	0.1965	0.1839
Payables/Assets	0.2505	0.1898	0.2277
Inventory/Assets	0.1452	0.0987	0.1635
Age	8.4615	7.0000	7.3865
Sales Growth	0.1521	0.0325	0.4424
Asset Turnover Ratio	1.3905	1.1380	1.1452
Net Profit Margin	−0.0081	0.0304	0.4551
ROA	0.0465	0.0375	0.2409
P/BV	0.8100	0.3565	1.1295
CF/Assets	0.0745	0.0515	0.2009
Capex/Assets	0.0112	0.0120	0.1894
Asset Tangibility	0.2955	0.2636	0.2388
Debt to Equity	0.6118	0.2424	0.8617
Cash/Assets	0.0880	0.0407	0.1352
Dividend Payout Ratio	0.0564	0.0000	0.1783

Source: own elaboration

Table 2. The results of binary logit regressions estimating the likelihood of payables or receivables increases

		Receivables Increase		Payables Increase
Model No	1				2
	Coefficient				Coefficient
Capex/Assets	−0.186315				−0.12303
	(0.1276)				(0.1173)
CF/Assets	−0.220783		*		−0.08216
	(0.1177)				(0.1119)
P/BV	−0.0691291		***		0.06759	***
	(0.02044)				(0.01952)
Asset Tangibility	−0.943202		***		0.33026	***
	(0.08087)				(0.07616)
Sales Growth	−0.20326		***		0.05372
	(0.05211)				(0.04968)
Debt to Equity	−0.0952491		***		−0.02421
	(0.02719)				(0.02556)
Cash/Assets	−1.13824		***		0.69728	***
	(0.1734)				(0.1602)
Dividend Payout Ratio	9.95E-05				0.00076
	(0.001342)				(0.001291)
Log-likelihood	−5358.9207				−5651.71
No of observations	8244				8244
Chi^2	710.77		***		125.19	***

Source: own elaboration. Note: the table presents the maximum likelihood estimates of a binary logit model. Asymptotic standard errors are reported in parentheses under the coefficients. ***, **, and * indicate significance at the 1%, 5%, and 10% levels respectively.

Table 3. The differences in working capital management by firms supplying/demanding trade credit

		Receivables Increase		Payables Increase
Model No	1				2
	Coefficient				Coefficient
Receivables/Assets	3.12995		***		−1.05285	***
	(0.1391)				(0.09990)
Payables/Assets	0.137569				0.0329
	(0.1090)				(0.09055)
Inventory/Assets	1.10E+00		***		−0.98648	***
	(0.1221)				(0.1050)
Log-likelihood	−6465.28577				−8619.34
No of observations	8244				8244
Chi^2	2389.4		****		629.26	***

Source: own elaboration. Note: the table presents the maximum likelihood estimates of a binary logit model. Asymptotic standard errors are reported in parentheses under the coefficients. ***, **, and * indicate significance at the 1%, 5%, and 10% levels respectively.

Table 4. The impact of firms’ age, size, and mode of financing on the likelihood of increasing trade receivables or trade payables

		Receivables Increase		Payables Increase
Model No	1				2
	Coefficient				Coefficient
Age	−0.041832		***		0.01386	***
	(0.002101)				(0.001977)
Log-likelihood	−5502.06508				−5689.52
No of observations	8244				8244
Chi^2	424.48		***		49.574	***
Ln Assets	−0.0598069		***		0.02327	***
	(0.002180)				(0.002075)
Log-likelihood	−5309.7264				−5645.25
No of observations	8236				8236
Chi^2	798.07		***		127.02	***
Net Equity Issuances/Assets	3.19029		***		−1.07741	***
	(0.2044)				(0.1436)
Log-likelihood	−5533.44162				−5684.19
No of observations	8244				8244
Chi^2	361.73		***		60.238	***

Source: own elaboration. Note: the table presents the maximum likelihood estimates of a binary logit model. Asymptotic standard errors are reported in parentheses under the coefficients. ***, **, and * indicate significance at the 1%, 5%, and 10% levels respectively.

Table 5. The study of contemporaneous cash flow allocation by the firms increasing trade receivables/trade payables

Payables Increase
Explained Variables	Capex/Assets		External Finance/Assets		Dividend/Assets		Cash Holdings Increase/Assets
no. of observations	4639		4639		4639		4639
Wald (joint)	60.05	***	104.9	***	38.44	***	38.75	***
R^2	0.443413		0.512348		0.502527		0.412155
Constant	0.251832	***	−0.544	***	0.009276	***	0.272818	***
	(0.014)		(0.039)		(0.003)		(0.032)
OCF/Assets	0.176	***	0.528	***	0.029	***	0.275	***
	(0.024)		(0.054)		(0.005)		(0.044)
P/BV	0.003623	*	−0.00461		−0.00056		0.002453
	(0.002)		(0.005)		(0.001)		(0.004)
Ln Assets	0.000622		−0.0001		0.000426		−0.00033
	(0.001)		(0.004)		(000)		(0.003)
Receivables Increase
Explained Variables	Capex/Assets		External Finance/Assets		Dividend/Assets		Cash Holdings Increase/Assets
no. of observations	2803		2803		2803		2803
Wald (joint)	55.26	***	21.9	***	17.47	***	20.55	***
R^2	0.53266		0.538313		0.599034		0.534247
Constant	0.033178	**	−0.15415	***	−0.00149		0.100674	**
	(0.015)		(0.051)		(0.004)		(0.040)
OCF/Assets	0.192	***	0.336	***	0.020	***	0.357	***
	(0.026)		(0.093)		(0.006)		(0.079)
P/BV	0.006142	*	−0.01436	**	0.001702	*	0.003465
	(0.003)		(0.007)		(0.001)		(0.006)
Ln Assets	0.00128		0.000941		0.000228		−0.00156
	(0.001)		(0.005)		(000)		(0.004)

Source: own elaboration. Notes: All models include the time and industry dummies (not reported). This table presents fixed-effect static panel model estimates. The heteroscedasticity robust standard errors are provided in parentheses. ***, **, and * indicate significance at the 1%, 5%, and 10% levels, respectively.

Table 6. The difference in cash flow sensitivity of investments between the firms increasing trade receivables and those increasing trade payables

Subsample	Receivables Increase		Payables Increase
no. of observations	2621		4587
Wald (joint)	103.2	***	534.9	***
R^2	0.082635		0.125542
Constant	0.250402	***	0.251876	***
	(0.039)		(0.045)
CF/K	0.090	***	0.194	***
	(0.009)		(0.008)
P/BV	−0.00253		0.016458	**
	(0.006)		(0.006)

Source: own elaboration. Notes: All models include the time and industry dummies (not reported). This table presents random-effect static panel model estimates. The heteroscedasticity robust standard errors are provided in parentheses. ***, **, and * indicate significance at the 1%, 5%, and 10% levels, respectively.

Table 7. The impact of trade finance on operational performance

Panel A.
Model No	1	2	3	4	5
no. of observations	8241	8139	8241	8116	8116
Wald (joint)	23.2***	39.51***	57.1***	18.47***	18.49***
R^2	0.020995	0.024047	0.024939	0.019871	0.019868
Constant	0.014392	0.007304	0.133799***	0.08212**	0.082208**
	(0.037)	(0.037)	(0.036)	(0.036)	(0.037)
Sales Growth	-0.015	-0.014	-0.014	-0.007	-0.007
	(0.011)	(0.011)	(0.011)	(0.011)	(0.011)
TREC/A	0.163383***	0.237549***
	(0.035)	(0.042)
(TREC/A)*RECINCR		-0.124***
		(0.042)
TP/A			-0.20908***	0.047708	0.045706
			(0.028)	(0.079)	(0.081)
(TP/A)^2				-0.21618**	-0.21679**
				(0.101)	(0.101)
(TP/A)*TPINCR					0.003
					(0.031)
Panel B.
Model No	6	7	8	9	10
no. of observations	8241	8139	8241	8116	8116
Wald (joint)	529.1***	746.7***	281.6***	439.5***	467.9***
R^2	0.190563	0.214022	0.164266	0.18538	0.187945
Constant	1.57761***	1.43503***	1.75277***	1.60883***	1.6002***
	(0.091)	(0.089)	(0.095)	(0.093)	(0.093)
Sales Growth	0.042**	0.046**	0.044**	0.039*	0.039
	(0.021)	(0.021)	(0.022)	(0.021)	(0.021)
TREC/A	1.67655***	2.20333***
	(0.073)	(0.084)
(TREC/A)*RECINCR		0.436***
		(0.078)
TP/A			0.9476***	2.02231***	2.21006***
			(0.057)	(0.164)	(0.168)
(TP/A)^2				-1.03208***	-0.96933***
				(0.209)	(0.209)
(TP/A)*TPINCR					-0.331***
					(0.063)

Source: own elaboration. Notes: All models include the time and industry dummies (not reported). This table presents the random-effect static panel model estimates. The heteroscedasticity robust standard errors are provided in parentheses. ***, **, and * indicate significance at the 1%, 5%, and 10% levels, respectively. In Panel A, the explained variable is Net Profit Margin; in Panel B, the explained variable is Asset Turnover Ratio; in Panel C, the explained variable is Return on Assets (ROA).