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Abstract

The purpose of this paper is to investigate the impact of the recent credit supply shockson the behaviour of trade credit (accounts payable) and trade debtor (accountsreceivable) of UK private firms.Design/methodology/approach – The fixed effect model is used in this study toinvestigate these issues.The results indicate that private firm's short term bank leverage is adversely affected bythe recent credit supply shock. In addition we have found that during the crises periodUK private firms do not increase trade credit. The results further highlight that thesefirms also reduced the extension of trade credit to their customer. In addition, the tradecredit behaviour of both manufacturing and service sector firms is adversely affected byexogenous credit contraction.It is the first study that investigates the behaviour of trade credit, trade debtor of theUK private firms during the recent crisis period.