Review of Corporate Finance > Vol 1 > Issue 1-2

Is There Mimicking Behavior in Firms’ Trade Credit Decisions?

Asad Ali Rind, IRG, Université Paris Est Créteil, France and Iqra University, Karachi, Pakistan, , Sabri Boubaker, IRG, Université Paris Est Créteil and EM Normandie Business School, Métis Lab, France, , Viet Anh Dang, University of Manchester, UK,
Suggested Citation
Asad Ali Rind, Sabri Boubaker and Viet Anh Dang (2021), "Is There Mimicking Behavior in Firms’ Trade Credit Decisions?", Review of Corporate Finance: Vol. 1: No. 1-2, pp 81-134.

Publication Date: 29 Apr 2021
© 2021 A. A. Rind, S. Boubaker and V. A. Dang
Corporate finance
Trade creditaccounts receivablefirm behaviorpeer effectsmimicking


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In this article:
1. Introduction 
2. Hypothesis Development 
3. Sample Data and Methodology 
4. Main Results 
5. Tests of Channels 
6. Additional Analysis 
7. Conclusions 


This paper investigates whether peer firms affect trade credit policy. Using data on US listed firms for the period 1997–2015, we document strong evidence of peer influence on trade credit provision. This result remains significant after using alternative trade credit measures, different peer proxies, and addressing endogeneity concerns using an instrumental variable approach based on the stock price shocks of industry peers. Our cross-sectional analysis further shows that peer effects in trade receivables only exist among suppliers that face fierce product market competition, consistent with the notion that firms closely mimic their peers due to competitive pressure. There is, however, mixed, and weak evidence on the argument that peer mimicking is driven by learning and reputational motives. Overall, our study highlights the important role of peer firm behavior in shaping a firm’s trade credit policy.