The impact of credit policy on firm performance among Malaysian manufacturers

Abstract

Credit policy is a set of temporary payment terms agreed between seller and buyer, in a form of credit. Credit expedites some of the complicated process organization experienced. Normally, the process required high level approval in order to complete procure activities or business transaction. In Malaysia, the credit policy has become one of the sales tools to secure more business, and identify new business opportunities. However, it is unsure to what extent the credit policy helps on firm performance. Thus, the aim of this study is to investigate the relation, the factors and the influence. The research tested on Malaysian manufacturers. A total of 35 survey questionnaires were received from Malaysian manufacturers and the data has been analysed using Statistical Package for Social Science (SPSS) software. Three out of four dimensional factors were rejected; credit structure, receivables management and inventory control. Only one of the factors was accepted and has significant impact on firm performance which is payables management. The results of the study revealed 41% of firm performance were depending on credit policy. This study fills the gap in the literature of credit policy conducted in Malaysia.