Managerial ability and trade credit

Abstract We examine whether and how managerial ability affects trade credit (accounts payable, in particular). The empirical analyses show that firms with higher managerial ability are associated with an increase in trade credit received. We also find that the impact of managerial ability on accounts payable is stronger for firms having poorer credit quality or more binding financial constraints. Our findings are robust to alternative measures of key variables, financial crises, product characteristics, and endogeneity concerns.