Codes of payment practice: do they make a difference?

Cowton, Christopher J. and San-Jose, Leire (2009) Codes of payment practice: do they make a difference? In: 2009 SBE Meeting, 6th - 9th August 2009, Chicago, USA. (Unpublished)

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Abstract

In recent decades the use of trade credit has been extended as a short-term financing. In this paper we analyze the use of trade credit in United Kingdom from an empirical perspective of ethical relevance. The main contribution of the paper is to analyze the differences in trade credit practices between companies that sign a payment code and those that do not. The results show that signatories of payment codes complete all the legal requirements applicable to UK companies. However, although there are differences between signatories of payment codes and those firms that do not sign any payment code in terms of days to pay suppliers, differences are not statistically significant. So, taking fewer days to pay suppliers is not linked with signing a payment code, at least statistically; but signatories of more recent payment codes are quicker payers than in general. The weak association between signatories and better payers raises a doubt as to the use of signatories of payment codes as a factor to identify better payers and calls into question the effectiveness of such codes.

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