Do trade credit and bank credit complement or substitute each other in public and private firms?
Do trade credit and bank credit complement or substitute each other in public and private firms?
In this study, we analyse the complementary and substitution effect between trade credit (TC) and short-term bank credit (BC) for public and private firms in the UK. Using a sample of 254,352 firm-year observations over the period 2008–2021, we find TC and BC are substitutes for public firms that have easy access to cheap external finance. In contrast, TC and BC are complements for private firms that have limited access to alternative financing resources, such as financial markets. Importantly, our results show that public firms are faster in adjusting towards the optimum level of their TC and BC than private firms in an attempt to determine the appropriate mix between these two types of financing. Our study introduces new evidence on the efficient management of TC and BC for public and private firms.
Private firms, Public firms, Short-term bank credit, Trade credit
748-765
Afrifa, Godfred Adjapong
14b02412-0197-4418-a9d2-dd933693307e
Tingbani, Ishmael
e6b2741a-d792-4adf-84cc-a2f64d5545ca
Alshehabi, Ahmad
df429384-77a3-4c65-b0a2-b98c83c885d7
Halabi, Hussein
abf2b13e-e1fe-4fe0-8beb-9a48059d8cfa
November 2023
Afrifa, Godfred Adjapong
14b02412-0197-4418-a9d2-dd933693307e
Tingbani, Ishmael
e6b2741a-d792-4adf-84cc-a2f64d5545ca
Alshehabi, Ahmad
df429384-77a3-4c65-b0a2-b98c83c885d7
Halabi, Hussein
abf2b13e-e1fe-4fe0-8beb-9a48059d8cfa
Afrifa, Godfred Adjapong, Tingbani, Ishmael, Alshehabi, Ahmad and Halabi, Hussein
(2023)
Do trade credit and bank credit complement or substitute each other in public and private firms?
International Review of Economics and Finance, 88, .
(doi:10.1016/j.iref.2023.07.017).
Abstract
In this study, we analyse the complementary and substitution effect between trade credit (TC) and short-term bank credit (BC) for public and private firms in the UK. Using a sample of 254,352 firm-year observations over the period 2008–2021, we find TC and BC are substitutes for public firms that have easy access to cheap external finance. In contrast, TC and BC are complements for private firms that have limited access to alternative financing resources, such as financial markets. Importantly, our results show that public firms are faster in adjusting towards the optimum level of their TC and BC than private firms in an attempt to determine the appropriate mix between these two types of financing. Our study introduces new evidence on the efficient management of TC and BC for public and private firms.
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Accepted/In Press date: 16 July 2023
e-pub ahead of print date: 17 July 2023
Published date: November 2023
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Publisher Copyright:
© 2023
Keywords:
Private firms, Public firms, Short-term bank credit, Trade credit
Identifiers
Local EPrints ID: 479971
URI: http://eprints.soton.ac.uk/id/eprint/479971
ISSN: 1059-0560
PURE UUID: 4fa3bb9b-8d5d-43f4-9094-2d82d445d17f
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Date deposited: 31 Jul 2023 16:52
Last modified: 17 Mar 2024 04:13
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Contributors
Author:
Godfred Adjapong Afrifa
Author:
Ahmad Alshehabi
Author:
Hussein Halabi
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