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Author(s): Angelica Marcia T, Bernardus Y. Nugroho
This study examines the use of trade credits by firms that are in a state of financial distress. Trade credit is short-term financing that can be useful for firms in financial distress. The purpose of this study is to analyze the effect of financial distress on trade credit. The study sample was taken from non-financial firms listed on the Indonesian Stock Exchange (IDX) from 2007 to 2016. The research method is panel data regression by using the estimation model of the fixed-effect model and random effect. This study found that firms in financial distress tend to increase the use of trade credit. This is reflected from the results of research showing the positive and significant coefficients on the variable financial distress on the ratio of trade payable to the cost of goods sold and the ratio of trade payable to equity. Based on the results of the study it can be explained that firms that are in a state of financial distress have a larger current liability, its source from short-term financing.