Managerial ability and trade credit: Emphasizing the role of credit rating and financial constraints

The role of management ability on the decisions and operations of firms is undeniable. Based on this, the role of managers' ability in firms has always been studied empirically. Therefore, the purpose of this research is to investigate the effect of management ability on trade credit. This research is applied in terms of purpose and correlational and retrospective in terms of method. To achieve the purpose of the research, the financial information of 161 firms (1610 firm-years) listed in the Tehran Stock Exchange (TSE) was used based on the systematic screening method and the multivariate regression method. The time period of this research is 2012 to 2021. The findings showed that management ability has a positive and significant effect on trade credit. Furthermore, these results are stronger in companies with lower credit ratings and in firms with higher constraints. In other words, in firms with a lower credit rating and in firms with higher restrictions, management ability has a stronger role in saving firms from critical situations. Based on these findings, it can be said that lenders appreciate the management ability of client or borrower firms and, therefore, are willing to provide credit to them.