Does trade credit spur firm performance? A case study in Vietnam

Purpose: The paper aims to examine the impacts of trade credit on firm performance in Vietnam, representing a small transition economy with high openness environment. Design/Methodology/Aproach: Generalized least squares method of estimation was used to test the hypotheses on a sample of 279 companies listed on Ho Chi Minh City Stock Exchange (HOSE) during the 2012-2018 period, after the global financial crisis. Findings: The research findings support the positive influences of trade credit on firm performance of large businesses through both accounts receivable and trade payables and reversal effects on small business. These results show the advantages of large-scale companies own over the smaller ones in acquiring financing resources and imposing market power on their business partners, which help them optimize the benefits of trade credit. Practical implications: Research results indicate that corporates should increase their business scale to capitalize on the benefits of trade credit, and small-scale businesses should control the cost of trade credit. Originality/Value: The paper contributes to the literature in three main ways. Firstly, our exclusive offers new insights into understanding the behavior of Vietnamese firms, and this would give implications for transition economies in the world. Secondly, the study was carried out in the post-crisis period, with regulatory changes in banking management. Thirdly, this research compensates for the lack of empirical evidence in this field of research.peer-reviewe

Impact of supply chain finance on firm performance in Vietnamese enterprises

The aim of this study is to experimentally examine the relationship between supply chain finance (SCF) and the financial performance of Vietnamese listed non-financial enterprises. A conceptual framework was developed and tested using secondary data collected from 659 companies listed on the Vietnam Stock Exchange in 2022. The path method is used using Stata 18 software. The results highlight that SCF has a positive impact on the financial performance of listed non-financial enterprises in Vietnam. These findings will help businesses better understand how SCF implementations benefit their financial performance in a global environment, especially in emerging markets

Financial bootstrapping and survivability in family firms: A resource-based perspective

Financial bootstrapping (FB) is a resource-dependent management strategy within the contingencies of organizing in small businesses. In this regard, the notion of start-up and operational capital has become an important ingredient in the performance of family businesses, particularly in resource-scarce environments. Drawing on the resource-based view theory (RBV) and a multiple case study design, we examine the various bootstrapping strategies of family businesses in the context of relatively underdeveloped institutions and markets. Following family businesses being at the convergence point of resource constraint, we show why some family businesses are more likely to survive than others. Our data evidence suggests that to ensure financial sustainability, longevity, survivability, and competitive advantage in family businesses, the use of both inward and outward bootstrapping strategies is crucial. Nevertheless, the use of personal and family financial resources is widely practised in resource-scarce environments. We conclude by delineating some relevant implications of our study to policy and research regarding the survival of family businesses

Customer’s operational efficiency and trade credit provision

This study examines whether the trade credit provision is affected by customers’ operational efficiency. We link the supplier firms with their major customers using the Customer Segment database in order to identify the trade credit provision for each pair of supplier-customer relationships. While suppliers have the incentive to provide trade credit to high-quality customers in order to increase market share, excess trade credit would also harm the suppliers once the customers default. Our empirical results indicate that operational efficiency and trade credit are positively associated. This finding supports the view that suppliers tend to select and provide trade credit to high productive customers. Moreover, we find that both suppliers and customers can benefit from more trade credit provision when the customer is more productive. The result is consistent with the supply chain cooperation view. Furthermore, we document the effect of customer’s operational efficiency and trade credit provision on the share of profit between supplier and customer under different situations such as when the supplier has higher bargaining power, lower cost of borrowing as well as lower customer concentration. The study contributes to the literature of trade credit by introducing an additional determinant. Moreover, it provides implication to the trade contract for non-financial firms

EXAMINATION OF ACCRUAL-REAL EARNINGS MANAGEMENT AND THE FINANCIAL CRISIS

The 2007/2008 global financial crisis caused tremendous economic and financial upheavals with inordinate national and international impact. The economic downturn and shift in the macro-economic landscape seemingly encouraged financiers to invest in what they now consider as ‘’safe’’ assets. The declining liquidity and flight to safety had a fundamental bearing on access to funds by organizations for example small firms were now perceived as being too risky whilst other organizations drew down heavily on existing credit lines as they were anxious that this would be revoked. With the change in perception of risk, firms needed to show resilience and stability and that they were less affected by the financial crisis and thus had healthier prospects and a viable option. Funders were still inclined to invest in organizations with sturdy financial results. This paper hypothesizes that earnings management and the motivation to manage positively the reported numbers would come into focus as managers of firms are now motivated by the incentive to improve their financials to signal to the market that they are ‘’safe’’ to fund and trade with and that they are in a position to service their debt thus avoiding restrictive action on their credit. This research focuses on the costs and benefits of accrual and real earnings management methods and their use before, during, and after the financial crisis periods. It examines earnings management as used by UK-listed firms. The results provide evidence of the use of earnings management methods that is dependent on the size of the firm and its constituent financial constraints. The argument would be that as the supply side of funding declines during the financial crisis and liquidity becomes less available so does the additional and extra need for firms to improve their financial performance so as to attract these limited resources and also avoid paying excess interest charges on the same