DOES VOLATILITY OF TRADE RECEIVABLES AFFECT CORPORATE CASH HOLDINGS? EMPIRICAL EVIDENCE FROM TURKEY

Guldehen Adiguzel

Research Article

Year 2019, Volume: 6 Issue: 4, 217 - 229, 30.12.2019

Guldehen Adiguzel

Abstract

References

Arellano, M., & Bond, S. (1991). Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations, The Review of Economic Studies,58, 277-297.
Bates, T., Kahle, K., & Stulz, R. (2009). Why do US firms hold so much more cash than they used to? Journal of Finance, 64, 1985-2021.
Biais, B., & Gollier, C. (1997). Trade Credit and Credit Rationing. The Review of Financial Studies, 10(4), 903-937.
Blundell, R., & Bond, S. (1998). Initial conditions and moment restrictions in dynamic panel models. Journal of Econometrics, 87, 115-143.
Box, T., Davis, R., Hill, M., & Lawrey, C. (2018). Operating Performance and Aggressive Trade Credit Policies. Journal of Banking and Finance, 89, 192-208.
Brechling, F., & Lipsey, R. (1963). Trade credit and monetary policy. The Economic Journal, 73(292), 618-641.
Brown, J., & Petersen, B. (2011). Cash holdings and R&D smoothing. Journal of Corporate Finance, 17, 694-709.
Burkart, M., & Ellingsen, T. (2004). In-Kind Finance: A Theory of Trade Credit. The American Economic Review, 94(3), 569-590.
Chen, C., & Kieschnick R. (2018). Bank credit and corporate working capital management. Journal of Corporate Finance, 48, 279-596.
Cheng, N.S. & Pike, R. (2003). The Trade Credit Decision: Evidence of UK Firms. Managerial and Decision Economics, 24, 419-438.
Dass, N., Kale, J., & Nanda, V. (2015). Trade credit, relationship-specific investment, and product market power. Review of Finance, 19(5), 1867-1923.
Deloof, M. (2003). Does Working capital management affect proﬁtability of Belgian ﬁrms? Business Finance and Accounting, 30(3-4), 573-587.
Deloof, M., & Jegers, M. (1996). Trade Credit, Product Quality, and Intragroup Trade: Some European Evidence. Financial Management, 25(3), 33-43.
Dittmar, A., & Mahrt-Smith, J. (2007). Corporate governance and the value of cash holdings. Journal of Financial Economics, 83, 599-634.
Doring, S., Drobetz, W., Janzen, M., & Meier, I. (2018). Global Cash Flow Sensitivities. Finance Research Letters, 25, 16-22.
Dudley, E., & Zhang, N. (2016). Trust and corporate cash holdings. Journal of Corporate Finance, 41, 363-387.
Duran, R., Lozano, M., & Yaman, S. (2016). Is Family Control Relevant for Corporate Cash Holding Policy? Journal of Business Fİnance and Accounting, 43(9-10), 1325–1360,.
El Ghoul, S., & Zheng, X. (2016). Trade Credit Provision and National Culture. Journal of Corporate Finance 41, 475-501.
Fernandes, N., & Gonenc, H. (2016). Multinationals and cash holdings. Journal of Corporate Finance, 39, 139-154.
Ferrando, A., & Mulier, K. (2013). Do firms use the trade credit channel to manage growth. Journal of Banking and Finance, 37(8), 3035-3046.
Gao, H., Harford, J., & Li, K. (2013). Determinants of corporate cash policy: Insights from private firms. Journal of Financial Economics, 109, 623-639.
Garcia-Teruel, P., & Martinez-Solano, P. (2007). Effects of working capital management on the SME proﬁtability. International Journal of Managerial Finance, 3, 164-177.
Garcia-Teruel, P., & Martinez-Solano, P. (2008). On the determinants of SME cash holdings: Evidence from Spain. Journal of Business Finance and Accounting, 35(1-2), 127-149.
Garcia-Teruel, P., & Martinez-Solano, P. (2010). Determinants of trade credit: A comparative study of European SMEs. International Small Business Journal 28(3) 215–233.
Ghaly, M., Dang, V., & Stathopoulos, K. (2017). Cash Holdings and Labor Heterogeneity: The Role of Skilled Labor. The Review of Financial Studies, 30(10), 3636-3668.
Gill, A., Biger, N., & Mathur, N. (2010). The relationship between working capital management and profitability: Evidence from the United States. Business and Economics Journal, 10, 1-9.
Gitman, L. J., & Zutter, C.J. (2015). Principles of Managerial Finance (14th Edition) Harlow, Pearson Education Limited.
Graham, J., & Leary, M. (2018). The evolution of corporate cash. The Review of Financial Studies, 31(11), 4288-4344.
Guney, Y., Ozkan, A., & Ozkan, N. (2003). Additional International Evidence on Corporate Cash Holding. Working Paper (SSRN Electronic Library).
Guney, Y., Ozkan, A., & Ozkan, N. (2007). International evidence on the non-linear impact of leverage on corporate cash holdings. Journal of Multinational Financial Management, 17, 45-60.
Hanlon, M., Maydew, E., & Saavedra, D. (2017). The taxman cometh: Does tax uncertainty affect corporate cash holdings? Review of Accounting Studies, 22, 1198-1228.
Hansen, L. (1982). Large sample properties of generalized method of moments estimators. Econometrica, 50, 1029-1054.
Harford, J., Mansi, S., & Maxwell, W. (2008). Corporate governance and ﬁrm cash holdings in the US. Journal of Financial Economics, 87, 535-555.
Harris, C. (2015). Trade Credit and Financial Flexibility. Banking and Finance Review, 7(1), 47-57.
Haushalter, D., Klasa, S., & Maxwell, W. (2007). The inﬂuence of product market dynamics on a ﬁrm’s cash holdings and hedging behavior. Journal of Financial Economics, 84, 797-825.
Hill, M., Kelly, G., & Lockhart, G. (2012). Shareholder returns from supplying trade credit. Financial Management, 41, 255–280.
Hill, M., Kelly, G., & Venkiteshwaran, V. (2015). On the Diminishing Return to Trade Credit. The Journal of Financial Research, 38(3), 305-317.
Itzkowitz, J. (2013). Customers and cash: How relationships affect suppliers' cash holdings. Journal of Corporate Finance, 19, 159-180.
Jensen, M., & Meckling, W. (1976). Theory of the firms; Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3(4), 305-360.
Kalcheva, & Lins. (2007). International Evidence on Cash Holdings and Expected Managerial Agency Problems. The Review of Financial Studies, 20(4), 1087-1112.
Kim, C., Mauer, D., & Sherman, A. (1998). The determinants of corporate liquidity: Theory and evidence. Journal of Financial and Quantitative Analysis, 33, 305-334.
Loncan, T. (2019). Foreign institutional ownership and corporate cash holdings: Evidence from emerging economies. International Review of Financial Analysis, Available online 22 December 2018 (In Press).
Long, M., Malitz, I., & Ravid, S. (1993). Trade Credit, Quality Guarantees, and Product Marketability. Financial Management, 22(4), 117-127.
Love, I., Preve, L., & Sarria-Allende, V. (2007). Trade credit and bank credit: Evidence from recent ﬁnancial crises. Journal of Financial Economics, 83, 453-469.
McLean, R., & Zhao, M. (2018). Cash savings and capital markets. Journal of Empirical Finance, 47, 49-64.
Meltzer, A. (1960). Mercantile credit, monetary policy, and size of firms. The Review of Economics and Statistics, 42, 429-437.
Melumad, N., & Nissim, D. (2009). Line-Item Analysis of Earnings Quality. Foundations and Trends® in Accounting, 3(2-3), 87-221.
Mian, S., & Smith, C. (1992). Accounts receivable management policy: theory and evidence. The Journal of Finance, 47(1), 169-200.
Miller, M., & Orr, D. (1966). A model of the demand for money by ﬁrms. Quarterly Journal of Economics, 80, 413-435.
Myers, S. (1984). The capital structure puzzle. Journal of Finance, 39, 575-592.
Myers, S., & Majluf, N. (1984). Corporate ﬁnancing and investment decisions when ﬁrms have information that investors do not have. Journal of Financial Economics, 13, 187-221.
Opler, T., Pinkowitz, L., Stulz, R., & Williamson, R. (1999). The determinants and implications of corporate cash holdings. Journal of Financial Economics, 52, 3-46.
Ozkan, A., & Ozkan, N. (2004). Corporate cash holdings: an empirical investigation of UK companies. Journal of Banking and Finance, 28, 2103-2134.
Paul, S. (2004). Strategic trade credit: an empirical study, PhD thesis. Leeds: Leeds University Business School.
Petersen, M., & Rajan, R. (1994). The Benefits of Lending Relationships: Evidence from Small Business Data. Journal of Finance, 43, 9-26.
Petersen, M., & Rajan, R. (1997). Trade credit: theories and evidence. Review of Financial Studies, 10(3), 661-691.
Pinkowitz, L., Stulz, R., & Williamson, R. (2003). Do firms in countries with poor protection of investor rights hold more cash? Cambridge: NBER Working Paper 10188.
Roodman, D. (2009). How to do xtabond2: an introduction to difference and system GMM in Stata. Stata Journal, 9, 86-136.
Subramaniam, V., Tang, T., Yue, H., & Zhou, X. (2011). Firm structure and corporate cash holdings. Journal of Corporate Finance, 17(3), 759-771.
Uyar, A., & Kuzey, C. (2014). Determinants of corporate cash holdings: evidence from the emerging market of Turkey. Applied Economics, 46(9), 1035–1104.
Wilson, N. & Summers, B. (2002). Trade credit terms offered by small firms: Survey evidence and ampirical analysis. Journal of Business Finance and Accounting, 29 (3-4), 317-351.
Wu, W., Rui, O., & Wu, C. (2012). Trade credit, cash holdings, and financial deepening: Evidence from a transitional economy. Journal of Banking and Finance, 36, 2868-2883.
Yazdanfer, D., & Ohman, P. (2015). The impact of credit supply on sales growth: Swedish evidence. International Journal of Managerial Finance, 11(3), 329-340

DOES VOLATILITY OF TRADE RECEIVABLES AFFECT CORPORATE CASH HOLDINGS? EMPIRICAL EVIDENCE FROM TURKEY

Year 2019, Volume: 6 Issue: 4, 217 - 229, 30.12.2019

Guldehen Adiguzel

Abstract

Purpose - This study aims to analyze the direct impact of trade receivables volatility on corporate cash holdings. Unlike previous studies, the present paper focuses on variability of a firm’s investment in trade credit which proxies instability of a firm’s trade receivables policy.
Methodology - The sample is composed of 330 Turkish industrials listed on Borsa Istanbul from 2000 to 2017. The model is estimated via system GMM (Generalized Method of Moments) to account for the partial adjustment process towards the target cash level and also to address the potential endogeneity issue related with volatility of trade receivables.
Findings- Estimations establish a significant negative effect of trade receivables volatility on cash holdings. The results are robust to alternative definitions of cash holdings and trade receivables volatility.
Conclusion - The evidence presented in this study suggests that instability of trade receivables policy weakens liquidity position of firms.

Keywords

Trade credit, corporate cash, Borsa Istanbul

References

Arellano, M., & Bond, S. (1991). Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations, The Review of Economic Studies,58, 277-297.
Bates, T., Kahle, K., & Stulz, R. (2009). Why do US firms hold so much more cash than they used to? Journal of Finance, 64, 1985-2021.
Biais, B., & Gollier, C. (1997). Trade Credit and Credit Rationing. The Review of Financial Studies, 10(4), 903-937.
Blundell, R., & Bond, S. (1998). Initial conditions and moment restrictions in dynamic panel models. Journal of Econometrics, 87, 115-143.
Box, T., Davis, R., Hill, M., & Lawrey, C. (2018). Operating Performance and Aggressive Trade Credit Policies. Journal of Banking and Finance, 89, 192-208.
Brechling, F., & Lipsey, R. (1963). Trade credit and monetary policy. The Economic Journal, 73(292), 618-641.
Brown, J., & Petersen, B. (2011). Cash holdings and R&D smoothing. Journal of Corporate Finance, 17, 694-709.
Burkart, M., & Ellingsen, T. (2004). In-Kind Finance: A Theory of Trade Credit. The American Economic Review, 94(3), 569-590.
Chen, C., & Kieschnick R. (2018). Bank credit and corporate working capital management. Journal of Corporate Finance, 48, 279-596.
Cheng, N.S. & Pike, R. (2003). The Trade Credit Decision: Evidence of UK Firms. Managerial and Decision Economics, 24, 419-438.
Dass, N., Kale, J., & Nanda, V. (2015). Trade credit, relationship-specific investment, and product market power. Review of Finance, 19(5), 1867-1923.
Deloof, M. (2003). Does Working capital management affect proﬁtability of Belgian ﬁrms? Business Finance and Accounting, 30(3-4), 573-587.
Deloof, M., & Jegers, M. (1996). Trade Credit, Product Quality, and Intragroup Trade: Some European Evidence. Financial Management, 25(3), 33-43.
Dittmar, A., & Mahrt-Smith, J. (2007). Corporate governance and the value of cash holdings. Journal of Financial Economics, 83, 599-634.
Doring, S., Drobetz, W., Janzen, M., & Meier, I. (2018). Global Cash Flow Sensitivities. Finance Research Letters, 25, 16-22.
Dudley, E., & Zhang, N. (2016). Trust and corporate cash holdings. Journal of Corporate Finance, 41, 363-387.
Duran, R., Lozano, M., & Yaman, S. (2016). Is Family Control Relevant for Corporate Cash Holding Policy? Journal of Business Fİnance and Accounting, 43(9-10), 1325–1360,.
El Ghoul, S., & Zheng, X. (2016). Trade Credit Provision and National Culture. Journal of Corporate Finance 41, 475-501.
Fernandes, N., & Gonenc, H. (2016). Multinationals and cash holdings. Journal of Corporate Finance, 39, 139-154.
Ferrando, A., & Mulier, K. (2013). Do firms use the trade credit channel to manage growth. Journal of Banking and Finance, 37(8), 3035-3046.
Gao, H., Harford, J., & Li, K. (2013). Determinants of corporate cash policy: Insights from private firms. Journal of Financial Economics, 109, 623-639.
Garcia-Teruel, P., & Martinez-Solano, P. (2007). Effects of working capital management on the SME proﬁtability. International Journal of Managerial Finance, 3, 164-177.
Garcia-Teruel, P., & Martinez-Solano, P. (2008). On the determinants of SME cash holdings: Evidence from Spain. Journal of Business Finance and Accounting, 35(1-2), 127-149.
Garcia-Teruel, P., & Martinez-Solano, P. (2010). Determinants of trade credit: A comparative study of European SMEs. International Small Business Journal 28(3) 215–233.
Ghaly, M., Dang, V., & Stathopoulos, K. (2017). Cash Holdings and Labor Heterogeneity: The Role of Skilled Labor. The Review of Financial Studies, 30(10), 3636-3668.
Gill, A., Biger, N., & Mathur, N. (2010). The relationship between working capital management and profitability: Evidence from the United States. Business and Economics Journal, 10, 1-9.
Gitman, L. J., & Zutter, C.J. (2015). Principles of Managerial Finance (14th Edition) Harlow, Pearson Education Limited.
Graham, J., & Leary, M. (2018). The evolution of corporate cash. The Review of Financial Studies, 31(11), 4288-4344.
Guney, Y., Ozkan, A., & Ozkan, N. (2003). Additional International Evidence on Corporate Cash Holding. Working Paper (SSRN Electronic Library).
Guney, Y., Ozkan, A., & Ozkan, N. (2007). International evidence on the non-linear impact of leverage on corporate cash holdings. Journal of Multinational Financial Management, 17, 45-60.
Hanlon, M., Maydew, E., & Saavedra, D. (2017). The taxman cometh: Does tax uncertainty affect corporate cash holdings? Review of Accounting Studies, 22, 1198-1228.
Hansen, L. (1982). Large sample properties of generalized method of moments estimators. Econometrica, 50, 1029-1054.
Harford, J., Mansi, S., & Maxwell, W. (2008). Corporate governance and ﬁrm cash holdings in the US. Journal of Financial Economics, 87, 535-555.
Harris, C. (2015). Trade Credit and Financial Flexibility. Banking and Finance Review, 7(1), 47-57.
Haushalter, D., Klasa, S., & Maxwell, W. (2007). The inﬂuence of product market dynamics on a ﬁrm’s cash holdings and hedging behavior. Journal of Financial Economics, 84, 797-825.
Hill, M., Kelly, G., & Lockhart, G. (2012). Shareholder returns from supplying trade credit. Financial Management, 41, 255–280.
Hill, M., Kelly, G., & Venkiteshwaran, V. (2015). On the Diminishing Return to Trade Credit. The Journal of Financial Research, 38(3), 305-317.
Itzkowitz, J. (2013). Customers and cash: How relationships affect suppliers' cash holdings. Journal of Corporate Finance, 19, 159-180.
Jensen, M., & Meckling, W. (1976). Theory of the firms; Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3(4), 305-360.
Kalcheva, & Lins. (2007). International Evidence on Cash Holdings and Expected Managerial Agency Problems. The Review of Financial Studies, 20(4), 1087-1112.
Kim, C., Mauer, D., & Sherman, A. (1998). The determinants of corporate liquidity: Theory and evidence. Journal of Financial and Quantitative Analysis, 33, 305-334.
Loncan, T. (2019). Foreign institutional ownership and corporate cash holdings: Evidence from emerging economies. International Review of Financial Analysis, Available online 22 December 2018 (In Press).
Long, M., Malitz, I., & Ravid, S. (1993). Trade Credit, Quality Guarantees, and Product Marketability. Financial Management, 22(4), 117-127.
Love, I., Preve, L., & Sarria-Allende, V. (2007). Trade credit and bank credit: Evidence from recent ﬁnancial crises. Journal of Financial Economics, 83, 453-469.
McLean, R., & Zhao, M. (2018). Cash savings and capital markets. Journal of Empirical Finance, 47, 49-64.
Meltzer, A. (1960). Mercantile credit, monetary policy, and size of firms. The Review of Economics and Statistics, 42, 429-437.
Melumad, N., & Nissim, D. (2009). Line-Item Analysis of Earnings Quality. Foundations and Trends® in Accounting, 3(2-3), 87-221.
Mian, S., & Smith, C. (1992). Accounts receivable management policy: theory and evidence. The Journal of Finance, 47(1), 169-200.
Miller, M., & Orr, D. (1966). A model of the demand for money by ﬁrms. Quarterly Journal of Economics, 80, 413-435.
Myers, S. (1984). The capital structure puzzle. Journal of Finance, 39, 575-592.
Myers, S., & Majluf, N. (1984). Corporate ﬁnancing and investment decisions when ﬁrms have information that investors do not have. Journal of Financial Economics, 13, 187-221.
Opler, T., Pinkowitz, L., Stulz, R., & Williamson, R. (1999). The determinants and implications of corporate cash holdings. Journal of Financial Economics, 52, 3-46.
Ozkan, A., & Ozkan, N. (2004). Corporate cash holdings: an empirical investigation of UK companies. Journal of Banking and Finance, 28, 2103-2134.
Paul, S. (2004). Strategic trade credit: an empirical study, PhD thesis. Leeds: Leeds University Business School.
Petersen, M., & Rajan, R. (1994). The Benefits of Lending Relationships: Evidence from Small Business Data. Journal of Finance, 43, 9-26.
Petersen, M., & Rajan, R. (1997). Trade credit: theories and evidence. Review of Financial Studies, 10(3), 661-691.
Pinkowitz, L., Stulz, R., & Williamson, R. (2003). Do firms in countries with poor protection of investor rights hold more cash? Cambridge: NBER Working Paper 10188.
Roodman, D. (2009). How to do xtabond2: an introduction to difference and system GMM in Stata. Stata Journal, 9, 86-136.
Subramaniam, V., Tang, T., Yue, H., & Zhou, X. (2011). Firm structure and corporate cash holdings. Journal of Corporate Finance, 17(3), 759-771.
Uyar, A., & Kuzey, C. (2014). Determinants of corporate cash holdings: evidence from the emerging market of Turkey. Applied Economics, 46(9), 1035–1104.
Wilson, N. & Summers, B. (2002). Trade credit terms offered by small firms: Survey evidence and ampirical analysis. Journal of Business Finance and Accounting, 29 (3-4), 317-351.
Wu, W., Rui, O., & Wu, C. (2012). Trade credit, cash holdings, and financial deepening: Evidence from a transitional economy. Journal of Banking and Finance, 36, 2868-2883.
Yazdanfer, D., & Ohman, P. (2015). The impact of credit supply on sales growth: Swedish evidence. International Journal of Managerial Finance, 11(3), 329-340

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Details

Primary Language	English
Subjects	Finance, Business Administration
Journal Section	Articles
Authors	Guldehen Adiguzel This is me 0000-0003-1326-0648
Publication Date	December 30, 2019
Published in Issue	Year 2019 Volume: 6 Issue: 4

Cite

APA	Adiguzel, G. (2019). DOES VOLATILITY OF TRADE RECEIVABLES AFFECT CORPORATE CASH HOLDINGS? EMPIRICAL EVIDENCE FROM TURKEY. Journal of Economics Finance and Accounting, 6(4), 217-229.

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