Date of Award

8-31-2020

Degree Type

Thesis

Degree Name

Master of Philosophy (MPHIL)

Discipline

Business

Department

Computing and Decision Sciences

First Advisor

Prof. LIU Liming

Abstract

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.

Keywords

operational efficiency, trade credit, supply chain management, operations-finance interface

Language

English

Recommended Citation

Chan, W. H. (2020). Customer’s operational efficiency and trade credit provision (Master's thesis, Lingnan University, Hong Kong). Retrieved from https://commons.ln.edu.hk/otd/78/

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