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

Michael Machokoto (), Daniel Gyimah () and Boulis Maher Ibrahim ()
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Michael Machokoto: African Development Bank Group
Daniel Gyimah: University of Aberdeen
Boulis Maher Ibrahim: Heriot-Watt University

Review of Quantitative Finance and Accounting, 2022, vol. 59, issue 3, No 2, 857-912

Abstract: 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.

Keywords: Trade credit; Time series; Emerging economies; Firm age; Employment (search for similar items in EconPapers)
JEL-codes: D22 G15 G32 G39 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1007/s11156-022-01061-z

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