Peer Effect on Trade Credit Supply: The Case in an Emerging Country

This study examines peer effects (peereffs) in trade credit provision and how COVID-19 affects peereffs in an emerging market. Using a sample of 642 listed firms in Vietnam from 2010 to 2022, we find evidence of the existence of peereffs in trade receivables. Furthermore, we are the first to find that COVID-19 tends to reduce peereffs in trade receivables. This suggests that firms might find it hard to extract information from peers’ trade credit extension during the COVID-19 outbreak, or the COVID-19 pandemic might make firms more reluctant to adopt peers’ trade receivables levels. We also investigate peereffs on firm performance in the realm of trade credit supply, which receives little attention. We find that peereffs increase firm performance, supporting the information-based channel and rivalry-based channel. Finally, even though COVID-19 makes it hard to keep up with peers, for those that can, they enjoy better performance in this period.