The impact of credit supply on sales growth: Swedish evidence

Purpose - The purpose of this paper is to empirically investigate the impact of credit supply on sales growth among small- and medium-sized enterprises (SMEs). Design/methodology/approach - The three-stage least square (3SLS) method was used to analyse a cross-sectional panel data set covering 13,548 Swedish SMEs across four industry sectors from 2009 to 2012. Findings - The study provides empirical evidence that trade credit in terms of accounts receivable significantly and positively affects sales growth, indicating that SMEs investing more in accounts receivable are more likely to achieve growth. Furthermore, lagged sales growth and firm size are positively, while firm age is negatively, related to growth. Practical implications - Managers can increase firm growth by efficiently managing the supply of credit to their customers, especially liquidity-constrained firms, thereby increasing sales growth. Originality/value - To the authors' best knowledge, this is one of the first empirical studies of the impact of credit supply in terms of accounts receivable on sales growth. The study applies the 3SLS method to a comprehensive cross-sectoral sample.