Does employee treatment affect trade credit? An international evidence

Abstract

Purpose This study aims to investigate the linkage of employee treatment and trade credit for a sample of 45 countries from 2003 to 2018. It explores the trade credit from a receivable perspective. Design/methodology/approach The estimations are performed using panel regression with fixed effects for both country and year. A batter of robustness tests is also performed to validate the findings. Findings The results reveal a positive and highly significant relation between employee treatment and trade credit. The authors observe that firms from labor-intensive and highly competitive industries are likelier to extend trade credit to their customers. The authors also find that firms from developed countries are more likely to extend trade credit to their customers. Practical implications First, to boost trade credit, the firms need to materialize fair employee treatment. Second, firms from labor-intensive firms and highly competitive industries need to care more about employee treatment which promotes trade credit. Originality/value The findings offer novel evidence of the relationship between employee treatment and trade receivables.