The Relation between Cash Holdings and Trade Credit, Consideration of Financial Deepening

Abstract

Access to financial markets and how is the markets way of financing, is one of the most important factors that specifies how access company to cash and level of it. Countries where the financial sector depth is less, It does not allocate resources efficiently between the needs and sometimes in these countries are faced with the problem of unavailability of appropriate financial instruments thus in which case they shall not gather enough resources. This study examines the relationship between trade credit payable and receivable with cash holding in view of the financial depth. The population of the study includes all Tehran Stock Exchange member firms after certain conditions are imposed. Sampling was undertaken and Finally, during the period 2006 to 2013,127 companies were selected. The methodology of research is descriptive. Evaluate the research hypotheses through regression analysis with the use of synthetic data has been carried out. Also we uses a number of control variables. These variables consist of Size, Liquid, Leverage, Debt, M/B, Cash flow. The results show no relationship between trade credit payable and receivable with cash holding in view of the financial depth. Also test the hypotheses in a single regression model did not change the results.

Keywords: Cash Holdings, Trade Credit, Financial Deepening

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