Table 5.
Cross-sectional heterogeneity in the effect of COVID on AP adjustment speed.
| (1) | (2) | (1) | (2) | (1) | (2) | |
|---|---|---|---|---|---|---|
| High sales volatility | Low sales volatility | High operating leverage | Low operating leverage | Large firms | Small firms | |
| Pre-COVID-19 | COVID-19 | Pre-COVID-19 | COVID-19 | Pre-COVID-19 | COVID-19 | |
| AP | 0.136** | 0.149*** | 0.140** | 0.238*** | 0.193*** | 0.118** |
| (2.01) | (2.67) | (2.21) | (5.01) | (3.35) | (2.43) | |
| Cost | −0.306** | −0.474* | −0.276 | 0.102 | −0.243 | 0.229 |
| (−2.18) | (−1.71) | (−1.20) | (0.42) | (−0.87) | (0.93) | |
| ∆Cost+ | 0.314* | 0.764** | 0.393 | 0.201 | 0.374 | 0.018 |
| (1.66) | (1.97) | (0.76) | (0.79) | (1.57) | (0.05) | |
| ∆Cost- | 0.010 | −0.447 | 0.222 | −0.583* | −0.243 | −0.281 |
| (0.05) | (−1.09) | (0.89) | (−1.88) | (−0.67) | (−0.96) | |
| Inventory | −0.094 | −1.337* | −0.715** | −0.630 | 0.467 | −0.149 |
| (−0.57) | (−1.92) | (−2.18) | (−1.28) | (1.10) | (−0.39) | |
| RE | 0.070*** | 0.055*** | 0.046*** | 0.058** | 0.064*** | 0.041*** |
| (3.17) | (3.53) | (2.85) | (2.52) | (2.71) | (2.73) | |
| Short-term debt | −0.002 | −0.021*** | −0.002 | 0.018 | −0.001 | 0.001 |
| (−0.39) | (−3.18) | (−0.54) | (0.73) | (−0.18) | (0.16) | |
| Size | −1.918*** | −1.819*** | −1.296*** | −1.949*** | −1.606*** | −1.447*** |
| (−4.04) | (−7.97) | (−3.60) | (−6.80) | (−5.71) | (−4.26) | |
| Size^2 | 0.164*** | 0.153*** | 0.106*** | 0.088*** | 0.102*** | 0.158*** |
| (3.97) | (7.67) | (3.54) | (2.61) | (4.60) | (4.58) | |
| Age | 0.008 | 0.021* | 0.009* | 0.056 | 0.012 | 0.015 |
| (1.14) | (1.80) | (1.87) | (0.76) | (0.76) | (1.05) | |
| Constant | 4.903*** | 4.217*** | 3.372*** | 7.182*** | 5.790*** | 2.905*** |
| (4.03) | (6.39) | (3.61) | (4.17) | (6.03) | (3.64) | |
| Firm fixed effect | Yes | Yes | Yes | Yes | Yes | Yes |
| Time fixed effect | Yes | Yes | Yes | Yes | Yes | Yes |
| N | 5551 | 6553 | 6589 | 3245 | 7401 | 3763 |
| Estimated Speed | 0.864 | 0.851 | 0.860 | 0.762 | 0.807 | 0.882 |
| Speed difference | 0.013*** | 0.098*** | 0.075*** |
This table reports the results of how cross-sectional heterogeneity of operational risk moderates the effect of COVID-19 on speeds of adjustment of AP toward the target. We use sales volatility, operating leverage, and firm size to measure a firm's operating risk. Sales volatility is the standard deviation of a firm's quarterly net sales over a rolling five-quarter period prior to each sample quarter. Operating leverage is measured by the inverse of the quarterly operating costs divided by assets, where operating costs are the cost of goods sold plus selling, general, and administrative expenses. For firms during the COVID period, we define high(low) risk firms as those with sales volatility (operating leverage) above(below) their cross-sectional median at time t. Firm size is calculated as the natural logarithm of the quarterly sales. Small firms are expected to have higher operational risks than large firms. For both high-risk and low-risk groups, we regress current values of trade credit on the lagged values of trade credit as well as a set of controls suggested by previous literature. The model is estimated using the Quasi-maximum likelihood (QML) method. The pre-COVID period includes nine years between 2011 and 2019. The COVID period includes 2020 and 2021. Control variable definitions are provided in Appendix Table A.1. t-values are shown in parentheses. ***, ** and * represents significance at the 1%, 5%, and 10% levels, respectively.