The Effect of Working Capital Management and Bargaining Power on the Speed of Business Credit Adjustment

Document Type : Research Paper

Authors

Department of Accounting, Payame Noor University, Tehran, Iran.

Abstract

Objective: Proper and timely financing is one of the essential and vital factors for the survival of companies and can contribute to their future growth. One type of financing is trade credit financing. Trade credit is one of the most important sources of short-term financing and can play a fundamental role in companies’ business activities. Considering that each company has a target level of trade credit that it seeks to achieve, the purpose of this study is to investigate the effect of working capital management and bargaining power on the speed of adjustment toward target trade credit.
 
Method: This research is applied in nature and, methodologically, is an ex post facto study, as it examines relationships after the occurrence of events. The statistical population of the study consists of companies listed on the Tehran Stock Exchange, covering the period from 2010 to 2023. Finally, by applying the systematic elimination method, 137 companies were selected from the statistical population for the final sample.
 
Results: The statistical results showed that working capital management can increase the speed of adjustment toward target trade credit. In addition, managers’ bargaining power in business negotiations has a direct effect on the speed of trade credit adjustment and accelerates the achievement of target trade credit.
 
Conclusion: Through proper management of working capital, the speed of adjustment toward target trade credit can be increased, enabling companies to maximize their ability to obtain financing through credit. Effective working capital management creates greater stability in the cash conversion cycle, attracts creditors’ confidence, and allows companies to gain an advantage over competitors in securing credit. Furthermore, managers’ bargaining power serves as a valuable asset in negotiations, enabling them to persuade the other party effectively.

Keywords

Main Subjects

References

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  • Receive Date: 06 October 2024
  • Revise Date: 17 January 2025
  • Accept Date: 28 July 2025

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