On bank debt substitution: the effect of management conservatism on trade credit, amidst tight monetary policy

• Main Authors: Ampil, Lorenzo Julio E., Co,, Joshua T., Libunao, Nikki Loren S., Te, Ryan Ervin Q.
• Format: text
• Language: English
• Published: Animo Repository 2016
• Subjects: Commercial credit > Philippines; Credit > Philippines > Management; Corporations > Philippines > Finance; Accounting; Business
• Online Access: https://animorepository.dlsu.edu.ph/etd_bachelors/6564
• Institution: De La Salle University

The increased pressure to be competitive has caused businesses from different industries to leverage their operations. Because of this, much research has been focused on explaining what allows businesses greater access to credit however, such has tended to focus on bank debt, which is why we, instead, focus on trade credit and the power of management conservatism in allowing firms access to such. In addition, we also study the extent through which trade credit can be used as a substitute for bank credit during bouts of tight monetary policy. We tested both hypothesis through the use of a random effects model and with data from 2004–2014 for publicly listed firms in the Philippines. Our findings allowed us to conclude that management conservatism is positively associated with trade credit although, we also found evidence against the existence of a substitution effect between trade and bank credit in the Philippines.