Firm Life Cycle And Trade Credit: Empirical Evidence From Vietnam

Abstract

This paper investigates whether life cycle stages explain firms’ propensity to engage in trade credit. As each stage of firm life has different capital resources, managerial strategies, and flexibility, it is anticipated that the use of trade credit by corporations varies across the course of different life cycle stages. Based on the sample of 4,192 Vietnamese listed firms over the 2008-2019 period, I discover that trade credit is significantly negatively related to introductory, growth, and decline firms and significantly positively associated with maturity businesses taking the shake-out stage as the benchmark. Further analysis reveals that financial distress and market competition serve as this relationship's amplifying transmission channels. Overall, my findings demonstrate that corporate lifecycle stages have a substantial role in determining trade credit used by firms.