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

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3 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 markeddecrease in trade credit that is more pronounced for firms in developed economies relative to those inemerging economies. We find little evidence that firm characteristics drive this trend, as their relationwith trade credit remains relatively stable throughout the sample period. We test several competingpropositions and find that the listing decade, institutional factors, and financial development explainthe downward trajectory in trade credit. We also report diminishing returns to trade credit that arehigher in the US and other developed economies than in emerging economies. These results are robustto alternative definitions of trade credit and to controlling for several firm-specific and macroeconomicfactors.

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

Keywords

Trade credit
Time series
Emerging economies
Firm age
Employment

ASJC Scopus subject areas

Accounting
Business, Management and Accounting(all)
Finance

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10.1007/s11156-022-01061-zLicence: CC BY

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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 markeddecrease in trade credit that is more pronounced for firms in developed economies relative to those inemerging economies. We find little evidence that firm characteristics drive this trend, as their relationwith trade credit remains relatively stable throughout the sample period. We test several competingpropositions and find that the listing decade, institutional factors, and financial development explainthe downward trajectory in trade credit. We also report diminishing returns to trade credit that arehigher in the US and other developed economies than in emerging economies. These results are robustto alternative definitions of trade credit and to controlling for several firm-specific and macroeconomicfactors.",

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

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