Click here to sign up. This optimal level can be reached if it maximizes the value of a firm Howorth and Westhead , Deloof , Afza and Nazir Contradicting evidence is found in India by Sharma and Kumar In the Netherlands, banks in particularly, were affected by the crisis. Durbin-Watson A number that test for autocorrelation in the residuals from a statistical regression analysis. They argue that this is caused by the fact that India is an emerging market and reputations of creditworthiness of firms are not fully developed and therefore many companies loosen their working capital management.

This research should enhance the understanding of the reasons behind the extension of trade credit during crisis periods. All these studies have used regression analyses using different independent variables for profitability. Theoretically, in a Chief Financial Officer CFO perspective, WCM is a simple and straightforward concept, which is ensuring enough financial resources to fund the current liabilities and current assets Harris, After a crisis, this extension is sharply cut, which means that the pre-crisis high short-term debt financial position is very disadvantageous after a crisis Love et al, Current liabilities Cash and other liabilities that have to be paid within one year. The second reason is that firms during non-crisis periods are better off keeping the risks they take to reasonable minimum.

Journal of Quality and Technology Management, 3 2pp.

Evidence is also found that when firms are able to access other cheaper financial resources, like bank loans, they use less trade credit substitution effect. What is possible is a comparison between the descriptive statistics of the non- crisis and the crisis period of this study.

Smaller percentages were found by Garcia-Teruel and MartinezKaraduman et al. It all deteriorated over time, despite the attempts by governments to stop this process.

Liquidity – Profitability Trade-off: They used a very large excellnt sample consisting of 58, firm years covering the period This number of observations should give enough reliability for this research.


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They found a tyesis relation between operating profitability and the number of days of inventories, account payables and account receivables for a sample of fifty Nigerian firms listed on the Nigerian Stock Exchange. Also an understanding of the taken risks by this extension is vital for the overall understanding of working capital management during crisis years. This reduction was mostly implemented on the levels of work-in-progress inventory.

He further stated the findings of Blinder and Macciniwhich indicate that higher inventory levels reduces the cost of supplying products and also protects against price fluctuations caused by changing macroeconomic factors. Before the hypotheses are developed regarding WCM during crisis years, theories and empirical evidence regarding financial constraints and its solutions are discussed.

This is also based on a sample with various different types of firms with various types and different levels of importance of inventories. Researchers have studied working capital management in many different ways. This is because in this study I evaluated the parts of the CCC individually and therefore management implications should be based on those more excellrnt individual analyses.

Boudewijn van den Berg | University of Twente –

This website is available to all students of the University of Twente. The second dummy variable tests the influence of particular years, which are — for the non-crisis period and and for the crisis period.

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Review of Economics and Statistics, 42 4pp. Also this huge difference is difficult to explain, but is likely to be caused by the almost 10 times higher amount of days of accounts theiss in the sample of Sharma and Kumar Account payables are the opposite of account receivables, instead of giving a credit on a sale, a firm receives a credit.


If a firm keeps more stock it could result in more sales, but it will also be more costly.

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Another explanation is that larger firms already have a large reputation concerning the quality of the products they produce. In the second part of the paragraph an overview of the literature study on the determinants of trade credit is given.

The first type uses the natural logarithm of assets to determine the size of a firm. Maxter trade- off is a choice between risk and return. International Research Journal of Finance and Economics, 24pp. A shortcoming of Pearson correlations is that they are not able to msster the causes from consequences, therefore regression analyses will be held Deloof, Scandinavian Journal of Economics, 90 3pp. The results of table 4.

excellent master thesis utwente

It implies that in crisis periods, firms are masteer off increasing their number of days accounts receivables, based on the profitability of the next year. Xiaohong Huang for their support and valuable advices given to me in the making of this thesis. Journal of Monetary Economics, 14, pp. As discussed in this paragraph, large firms can be seen as financial intermediaries in times of a financial crisis, but the risks and rewards that these firms have to consider, when they provide financing, is not discussed.

They found that firms before the crisis, with high short term debt, extend significant trade credit. This is used in the studies of Samiloglu and Demirgunes and Sharma and Kumar