Get access

Trade credit policy and firm value


  • The authors gratefully acknowledge the helpful comments and suggestions received during the editing/review process. This research is part of the project 15358/PHCS/10 financed by Fundación Séneca Science and Technology Agency of the Region of Murcia (Spain) – (Program: PCTIRM 1114), and the project SEJ 6828 financed by the Economy, Innovation and Science Agency of Andalusia. We also acknowledge support from Fundación CajaMurcia.


This manuscript studies the shape of the relation between firm value and trade credit for a sample of Spanish listed firms in the period 2001 to 2007. Considering the trade-off between benefits and costs of investing in trade credit, we estimate a non-linear relationship between accounts receivable and firm value. As expected, the results obtained show a positive relation between firm value and trade credit at low levels of receivables and a negative one at high levels. To give robustness to the results, we analyse whether deviation from target accounts receivable level reduces firm value. Consistent with the previous analysis, we find that deviations from this level of receivables decrease firm value.