Document Type

Article

Publication Date

9-28-2023

Abstract

We investigate how high-ability managers affect trade credit policies of U.S. publicly traded companies from 2003 to 2016. Consistent with the prediction of an “Imbalance of power” in the supply chain, we find that firms with more able managers implement more favorable trade credit policies with both upstream and downstream business partners (i.e., fewer trade credit days in receivables, more trade credit days in payables, and lower net trade credit days), indicating that managerial ability is an important determinant of corporate trade credit. Our cross-sectional analyses provide further support for the bargaining power view of trade credit. The results are robust to various tests mitigating the endogeneity concerns. This study sheds light on the importance of more able managers in working capital and supply chain management.

This article was published Open Access through the CCU Libraries Open Access Publishing Fund. The article was first published in the Journal of Behavioral and Experimental Finance: https://doi.org/10.1016/j.jbef.2023.100857

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