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The Impact of Trade Credit Investment on Manufacturing Firms' Profitability: Evidence from Vietnam

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  • Duong Phuong Thao Pham

    (School of Finance, University of Economics Ho Chi Minh City, 59C Nguyen Dinh Chieu, Ward 6, District 3, Ho Chi Minh City, Vietnam)

  • Thi Cam Ha Huynh

    (School of Finance, University of Economics Ho Chi Minh City, 59C Nguyen Dinh Chieu, Ward 6, District 3, Ho Chi Minh City, Vietnam)

Abstract

The aim of this study is to examine the effect that trade credit investment has on firms' profitability. The characteristics of this relationship have not been dealt with in depth for manufacturing firms. We use panel data for a total of 227 Vietnamese publicly listed manufacturing firms for the period 2005-2017. Different econometric estimation techniques such as the feasible generalized least squares, fixed effects and random effects and different calculation of firm performance such as non market-based measure (return on assets) and market-based measure (Tobin's q) are employed to validate the consistent results. The robust results confirm a statistically significant inverted U-shaped relationship between trade credit investment and profitability.

Suggested Citation

  • Duong Phuong Thao Pham & Thi Cam Ha Huynh, 2020. "The Impact of Trade Credit Investment on Manufacturing Firms' Profitability: Evidence from Vietnam," Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, Mendel University Press, vol. 68(4), pages 775-796.
    • Handle: RePEc:mup:actaun:actaun_2020068040775
    DOI: 10.11118/actaun202068040775
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    3. Abdullah Al Mahmud & Muhammad Shahin Miah & Mohammad Rakib Uddin Bhuiyan, 2022. "Does Trade Credit Financing Affect Firm Performance? Evidence from an Emerging Market," IJFS, MDPI, vol. 10(4), pages 1-19, September.

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