Trade credit, cash holdings, and product market competition

Positive changes in cash holdings have led to an increase in the company's cash reserves, which can lead to an increase in positive changes in trade credit (increase in trade credit). The main purpose of this study is to investigate the relationship between trade credit, cash holdings and product market competition in companies listed in the Tehran Stock Exchange. To test the research hypotheses, a multiple linear regression model based on panel data has been used. The results of the survey of 140 companies listed on the Tehran Stock Exchange during the period 2014 to 2020 indicate that there is a positive and significant relationship between changes in cash holdings and changes in trade credit. In other words, in companies where there were more changes in cash holdings, the level of change in trade credit was also higher. Findings showed that financial strength has a positive effect on the relationship between changes in cash holdings and changes in trade credit. In other words, companies with higher financial power had a greater effect of the change in cash hold on the change in trade credit. Also, the results showed that market power has a positive effect on the relationship between changes in cash holdings and changes in trade credit. In other words, companies with more market power had a greater effect of the change in cash holdings on the change in trade credit. Findings showed that investing in research and development has a positive effect on the relationship between changes in cash holdings and changes in trade credit. In other words, firms with R&D expenditures had a higher impact of the change in cash retention on the change in trade credit.