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A dynamic approach to accounts receivable: the case of Jordanian firms

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Abstract

This paper studies the trade credit policy of firms for a sample of Jordanian listed firms in the period 2000–2014. In addition, this paper tests whether the accounts receivable decisions follow a model of partial adjustment. The generalized methods of moments estimation results suggest that firms have a target accounts receivable level and move toward this target quickly. In addition, we find that short term finance, internal cash flow, positive sales growth, product quality, and profitability are playing an important role in the trade credit policy. The study recommends that firms must pay attention to their relationship with customers because they represent an important investment opportunity. Furthermore, firms should maintain close relationships with banks because it influences their trade credit policy.

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Authors and Affiliations

  1. Banking and Finance Department, Business School, Mutah University, Al-Karak, Jordan

    Ala’a Adden Abuhommous

  2. Accounting Department, Business School, Mutah University, Al-Karak, Jordan

    Tareq Mashoka

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  1. Ala’a Adden Abuhommous
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  2. Tareq Mashoka
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Correspondence to Ala’a Adden Abuhommous.

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Abuhommous, A.A., Mashoka, T. A dynamic approach to accounts receivable: the case of Jordanian firms. Eurasian Bus Rev 8, 171–191 (2018). https://doi.org/10.1007/s40821-017-0074-8

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  • DOI: https://doi.org/10.1007/s40821-017-0074-8

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