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

Research output: Contribution to journalArticlepeer-review

7 Citations (Scopus)
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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 languageEnglish
Pages (from-to)857–912
Number of pages56
JournalReview of Quantitative Finance and Accounting
Issue number3
Early online date11 May 2022
Publication statusPublished - Oct 2022

Bibliographical note

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.


  • Trade credit
  • time series
  • Emerging economies
  • firm age
  • employment


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