Trade credit in SMEs: Evidence from East Asia and the Pacific

Hoang, Cong Huan

Abstract

Using a sample of 1,509 non-financial listed small and medium-sized enterprises (SMEs) from nine countries or territories located in East Asia and the Pacific – China, Vietnam, Malaysia, Thailand, Japan, South Korea, Taiwan, Singapore, and Hong Kong - during the period from 2010 to 2016, this thesis investigates trade credit in SMEs by conducting three empirical studies.
The first study investigates whether there is a non-linear association between trade credit and profitability of SMEs. The result reveals that trade credit has an inverted U-shaped relationship with profitability. That is, there is an optimal level of trade credit where firms can maximise profitability. Moreover, the study examines whether the optimal level of trade credit varies according to the level of financial constraints of SMEs. The finding indicates that less financially constrained firms have a higher optimal level than more financially constrained firms.
The second study examines the role of national culture – an important informal institution – in the variations in trade credit usage of SMEs across different countries. This study finds that Hofstede’s cultural dimension of collectivism has a positive association with trade credit receivable and a negative association with trade credit payables. Besides, uncertainty avoidance has a negative association with trade credit receivable and trade credit payable. Moreover, ability of access to short-term bank credit and level of cash holdings are more important for trade credit decisions in countries with a high level of collectivism and a low level of uncertain avoidance.
The third study investigates whether there is an association between trade credit provision and inventory investment. This study finds evidence that trade credit provision has a negative relationship with inventory investment. Moreover, the study shows that the strength of this association varies according to firms’ characteristics, namely changes in sales, market power and financial constraints.

Citation

Hoang, C. H. (2020). Trade credit in SMEs: Evidence from East Asia and the Pacific. (Thesis). University of Hull. https://hull-repository.worktribe.com/output/4912829

• Thesis Type: Thesis
• Deposit Date: Nov 12, 2024
• Publicly Available Date: Apr 2, 2025
• Keywords: Finance
• Public URL: https://hull-repository.worktribe.com/output/4912829
• Additional Information: Business School; University of Hull
• Award Date: Mar 1, 2020