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Strategic deviance and trade credit

Author

Listed:
  • Harshali Damle
  • Rajesh Kumar Sinha
Abstract
Purpose - Literature sparsely documents the association between the deviant behavior of a firm and its financial policies. Trade credit is one of the most critical financial policies of a firm. In this study, the authors examine the association between strategic deviance and trade credit. Design/methodology/approach - The authors explore a strategy-based explanation for trade credit by examining whether strategic deviance affects trade credit using a sample of 33 countries from 1996 to 2020. The authors test the hypothesis using static OLS regression models. To address autocorrelation and endogeneity issues, the authors use dynamic OLS models, lag models, and instrumental variable approach. Findings - The authors find that an increase in strategic deviance reduces both demand and supply of trade credit, and the study’s results indicate that a one standard deviation increase in strategic deviance leads to a 1.34% decrease in the demand for trade credit. Also, a one standard deviation increase in strategic deviance leads to a 2.26% fall in the supply of trade credit. Practical implications - This study facilitates managers to formulate trade credit policies when choosing a deviant strategy. Originality/value - To the best of the authors’ knowledge, this is the first study to explore the association between strategic deviance and trade credit policies.

Suggested Citation

  • Harshali Damle & Rajesh Kumar Sinha, 2022. "Strategic deviance and trade credit," International Journal of Managerial Finance, Emerald Group Publishing Limited, vol. 19(4), pages 831-852, September.
    • Handle: RePEc:eme:ijmfpp:ijmf-02-2022-0081
    DOI: 10.1108/IJMF-02-2022-0081
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    Citations

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    Cited by:

    1. Ahsan Habib & Dinithi Ranasinghe & Ahesha Perera, 2024. "Business strategy and strategic deviation in accounting, finance, and corporate governance: A review of the empirical literature," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 64(1), pages 129-159, March.

    More about this item

    Keywords

    Trade credit; Strategic deviance; Cross-country; G32;
    All these keywords.

    JEL classification:

    • 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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