The evolution of trade credit: New evidence from developed versus developing countries

Michael Machokoto; Daniel Gyimah; Boulis  Maher Ibrahim

doi:10.1007/s11156-022-01061-z

The evolution of trade credit: New evidence from developed versus developing countries

Michael Machokoto, Daniel Gyimah, Boulis Maher Ibrahim^* (Corresponding Author)

^*Corresponding author for this work

Accountancy & Finance, Finance

Research output: Contribution to journal › Article › peer-review

6 Citations (Scopus)

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Abstract

Using a large sample of listed firms from 72 countries over the period 1990–2019, we document a marked decrease in trade credit that is more pronounced for firms in developed economies relative to those in emerging economies. We find little evidence that firm characteristics drive this trend, as their relation with trade credit remains relatively stable throughout the sample period. We test several competing propositions and find that the listing decade, institutional factors, and financial development explain the downward trajectory in trade credit. We also report diminishing returns to trade credit that are higher in the US and other developed economies than in emerging economies. These results are robust to alternative definitions of trade credit and to controlling for several firm-specific and macroeconomic factors.

Original language	English
Pages (from-to)	857–912
Number of pages	56
Journal	Review of Quantitative Finance and Accounting
Volume	59
Issue number	3
Early online date	11 May 2022
DOIs	https://doi.org/10.1007/s11156-022-01061-z
Publication status	Published - Oct 2022

Bibliographical note

Acknowledgement
We are grateful to the Editor-in-Chief (Cheng-Few Lee) and two anonymous reviewers for useful comments. We also thank Abongeh Tunyi, Anywhere Sikochi, Marvellous Kadzima and seminar participants at Heriot-Watt University, the University of Aberdeen and University of the Witwatersrand. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of any organisation with which the authors are affiliated. All errors remain ours.

Keywords

Trade credit
time series
Emerging economies
firm age
employment

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Cite this

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abstract = "Using a large sample of listed firms from 72 countries over the period 1990–2019, we document a marked decrease in trade credit that is more pronounced for firms in developed economies relative to those in emerging economies. We find little evidence that firm characteristics drive this trend, as their relation with trade credit remains relatively stable throughout the sample period. We test several competing propositions and find that the listing decade, institutional factors, and financial development explain the downward trajectory in trade credit. We also report diminishing returns to trade credit that are higher in the US and other developed economies than in emerging economies. These results are robust to alternative definitions of trade credit and to controlling for several firm-specific and macroeconomic factors.",

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N2 - Using a large sample of listed firms from 72 countries over the period 1990–2019, we document a marked decrease in trade credit that is more pronounced for firms in developed economies relative to those in emerging economies. We find little evidence that firm characteristics drive this trend, as their relation with trade credit remains relatively stable throughout the sample period. We test several competing propositions and find that the listing decade, institutional factors, and financial development explain the downward trajectory in trade credit. We also report diminishing returns to trade credit that are higher in the US and other developed economies than in emerging economies. These results are robust to alternative definitions of trade credit and to controlling for several firm-specific and macroeconomic factors.

AB - Using a large sample of listed firms from 72 countries over the period 1990–2019, we document a marked decrease in trade credit that is more pronounced for firms in developed economies relative to those in emerging economies. We find little evidence that firm characteristics drive this trend, as their relation with trade credit remains relatively stable throughout the sample period. We test several competing propositions and find that the listing decade, institutional factors, and financial development explain the downward trajectory in trade credit. We also report diminishing returns to trade credit that are higher in the US and other developed economies than in emerging economies. These results are robust to alternative definitions of trade credit and to controlling for several firm-specific and macroeconomic factors.

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KW - time series

KW - Emerging economies

KW - firm age

KW - employment

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The evolution of trade credit: New evidence from developed versus developing countries

Abstract

Bibliographical note

Keywords

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