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Theories Explaining Interfirm Trade Credits An Investigation in Borsa Istanbul

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  • Arzu Şahin

    (Adana Science And Technology University)

Abstract

Interfirm trade credit that is a lending instrument between firms offers various benefits to the seller and buyer and the literature has presented a number of theories explaining trade credit based on these benefits. It was realized that the validity of these theories for the Turkish real sector has not been examined sufficiently and therefore in this study, it is aimed to give information about the trade credit theories and to test three of these theories on a sample of publicly held companies in the same sector. For this purpose, the characteristics of the seller, which affects the level of trade credit, have been investigated through the variables constructed by the data of the 23 firms determined among the food, beverage and tobacco sector companies listed in BIST. According to the findings of the analysis, firms that are being relatively younger, not receiving collateral for their accounts receivables, having a higher short-term borrowing rate and achieving a higher return on credit sales, extend more trade credits. These results reveal that the firms analysed behave in consistent with the theory of quality indicator and price discrimination theory in terms of trade credit behaviour.

Suggested Citation

  • Arzu Şahin, 2018. "Theories Explaining Interfirm Trade Credits An Investigation in Borsa Istanbul," Journal of Finance Letters (Maliye ve Finans Yazıları), Maliye ve Finans Yazıları Yayıncılık Ltd. Şti., vol. 33(110), pages 37-70, October.
    • Handle: RePEc:acc:malfin:v:33:y:2018:i:110:p:37-70
    DOI: https://doi.org/10.33203/mfy.423917
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    More about this item

    Keywords

    trade credit; credit sales theories; product quality theory; financial intermediation theory; price discrimination theory; BIST accounts receivable;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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