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Does Advertising Facilitate Supplier-Provided Trade Credit?

  • Omar Farooq ORCID logo EMAIL logo and Kashif Saleem
Published/Copyright: October 17, 2024

Abstract

Using the data of non-financial firms from India, the paper finds that firms with large advertising budget tend to receive more trade credit from their suppliers than firms with low advertising budget. The findings are consistent with the assumption that advertising reduces information asymmetries, builds brand image, and improves firm performance. All of these factors facilitate the access to trade credit. The findings of this paper hold after numerous sensitivity checks.


Corresponding author: Omar Farooq, School of Business, ADA University, Ahmedbey Agaoglu 61, Baku, AZ1008, Azerbaijan, E-mail:

Appendix A: Definition of Variables

Variable Definition Source
TRADE Accounts Payable Cost of Goods Sold Worldscope
ADVERT Total Advertising Expenditures Total Assets Thomson reuters eikon
SIZE Natural logarithm of market capitalization Worldscope
LEVERAGE Total Debt Total Assets Worldscope
EARNINGS Earnings Before Interest and Taxes Total Assets Worldscope
DIVIDENDS { 1 , If Dividends > 0 0 , If Dividends = 0 Worldscope
BMR Book Value of Equity Market Value of Equity Worldscope
ANALYST Total number of analysts covering a firm Thomson reuters eikon
AUR Total Sales Total Assets Worldscope
SALARY Salary Expenses Operating Expenses Worldscope
CASH Cash Total Assets Worldscope
BETA Sensitivity of stock returns to market returns (based on the linear regression of the logarithmic adjusted returns and the returns of the corresponding market index – using previous five years of monthly data) Datastream
VOLATILITY Standard deviation of stock returns Datastream
INTANGIBLES Total Intangible Assets Total Assets Worldscope
YDUM Set of year dummies Worldscope
IDUM Set of industry dummies based on Industry Classification Benchmark (ICB) Worldscope
COVID { 1 , If Year = 2020  or  2021 0 , Otherwise Self-calculation
CRISIS { 1 , If Year = 2007 , 2008  or  2009 0 , Otherwise Self-calculation
ADVERT (alternate definition) Total Advertising Expenditures Total Sales Thomson reuters eikon
ADVERT (alternate definition) Total Advertising Expenditures Market Capitalization Thomson reuters eikon
TRADE (alternate definition) Accounts Payable Total Sales Worldscope
TRADE (alternate definition) Accounts Payable Total Assets Worldscope

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Received: 2024-05-02
Accepted: 2024-09-23
Published Online: 2024-10-17

© 2024 Walter de Gruyter GmbH, Berlin/Boston

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