Asset redeployability and trade credit

Mostafa Hasan*, Nurul Alam

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

Abstract

We examine the relationship between asset redeployability and firms' use of trade credit. Using a large sample of US public firms, we document that firms with more redeployable assets use significantly less trade credit. Our cross-sectional analyses show that the negative relation between asset redeployability and trade credit is more salient for firms with more financing constraints, high levels of information asymmetry, and less corporate liquidity. These findings remain robust to alternative measures of asset redeployability, trade credit, and alternative regression specifications, and they are not driven by an endogeneity problem. Finally, we find that firms with fewer redeployable assets adjust trade credit to the target level relatively quickly when compared with firms having more redeployable assets. Overall, findings from this study provide robust evidence that asset redeployability has an important bearing on firms' short-term financing.
Original languageEnglish
Article number102024
JournalInternational Review of Financial Analysis
Publication statusAccepted/In press - 2022

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