Dynamic Decision-Making on Trade Receivables under COVID-19: Moderating Roles of Firm Characteristics in an Emerging Market

Abstract

Trade credit management is a critical financial decision that firms must continuously recalibrate in response to systemic risk. This study examines how the COVID-19 pandemic altered this decision process by analyzing its impact on the speed at which firms adjust trade receivables toward their target level. Using the Dynamic Panel Fractional estimator on an unbalanced panel of 583 non-financial firms listed on the Vietnamese stock market over 2015–2024, the study documents that the COVID-19 pandemic significantly increases the speed of trade receivables adjustment. This acceleration reflects stronger credit risk avoidance incentives and intensified liquidity pressures during periods of severe macroeconomic uncertainty. Furthermore, the analysis shows that financial leverage and state ownership mitigate the COVID-19-induced increase in adjustment speed, whereas board size amplifies it. These findings provide evidence that capital structure and ownership act as structural buffers that dampen crisis period adjustment while board governance serves as an enabling mechanism that strengthens firms’ capacity to respond to heightened credit risk. Overall, the results extend the dynamic trade-off theory of trade receivables to the context of systemic shocks and offer practical implications for designing more flexible and risk-aware trade credit policies in emerging markets.