Abstract
Indian operating firms frequently sell through credit relationships in which billing, collection, settlement, tax reconciliation, and receivable monitoring do not move at the same speed. This study examines whether digital collection formalization improves financial performance by reducing receivable frictions. Digital collection formalization refers to the integration of electronic invoicing, bank-linked settlement, customer payment portals, automated receivable aging, tax-document matching, and collection escalation routines. Using an unbalanced panel of 612 nonfinancial Indian listed firms from 2016 to 2024, the study estimates fixed-effects models, dynamic panel specifications, matched difference-in-differences tests around receivable transparency shocks, quantile regressions, and instrumental-variable models. Financial performance is measured through operating return on assets, operating cash-flow margin, free-cash-flow conversion, earnings persistence, and working-capital downside risk. The results show that digital collection formalization is positively associated with financial performance, mainly through shorter collection cycles and lower doubtful-debt provisions. A one-standard-deviation increase in digital collection formalization predicts a 0.48 percentage-point increase in operating return on assets, a 0.73 percentage-point increase in operating cash-flow margin, and a 4.6-day reduction in days sales outstanding. The performance effect is stronger after receivable transparency shocks and among firms with high domestic business-to-business sales. The effect is weaker among export-intensive firms and firms already operating with low receivable days. The evidence suggests that digital collection formalization improves financial performance in India by converting reported sales into cash more quickly and by reducing uncertainty around receivable realization.