Observational analysis shows the influence of financial distress on trade credit in non-financial companies, indicating profitability's limited effect.
This research aims to elucidate the relationship between trade credit (supply) and the profitability/growth of non-financial companies in Pakistan. The 386 unbalanced panels listed in Pakistan Stock Exchange between 2004 and 2017 are analyzed through GMM with 3976 annual observations. The research indicated the insignificant relationship between profitability and growth with the net trade credit of non-financial companies. On the other hand, net trade credit positively correlates with return on equity, company size, and age. Financial distress has a significant moderating effect on net trade credit, and firms need to increase return on equity and growth to overcome financial distress.
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Noreen et al. (2023) studied this question.
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