Effect of Trade Credit on Firms Growth: A Case Study of Pakistani Non-financial Firms

Abstract

This study attempts to investigate the impact of trade credit on the growth of non-financial firms of Pakistan. Most of the businesses move from traditional business transactions to automated and sophisticated credit transaction methods. As large firms have better access to financial institutions and markets but still, they are interested to seek firm growth by adopting the trade credit policies. This study collects information from non-financial firms of Pakistan. Panel data is used to explore the impact of trade credit on firms growth. The data collect from the year 2001- 2015 of 257 non-financial firms of Pakistan. A technique of panel data analysis, generalized method of moment used to analyze the data. The results suggest that the trade credit and GDP have a positive significant impact on firms’ growth. Moreover, Firm’s age, its size and inflation in the economy have also impacted the firm’s growth but in negative direction. Finally, the non-financial listed firms of Pakistan can achieve their growth targets by adopting trade credit policies