Delaying Payments after the Financial Crisis: Evidence from EU Companies

Abstract

The paper investigates economic impact of delayed payments caused by liquidity crisis in the European Union. Using micro data sets on financial statements of 54,277 firms for the period of 2005 to 2014 inclusive, we perform panel data analysis by estimating fixed effects regression models with selected macroeconomic shocks. The results show high variability of late payments during financial crisis compare to period of relative stable economic situations and late payments is significantly evident across countries under different economic conditions. Additionally, we identify positive relationship between the response variable, late payments, and firm profitability measured with returns on assets, but negative relationship with firm total assets as it depends on the speed of collections from receivables. The results suggest delays in payment of invoices beyond the given credit period across the different European Union member countries.

Keywords

• late payments
• accounts receivable
• accounts payable
• credit collection
• credit period
• financial crisis