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Trade credits substitution during crisis period: spatial aspects within developing countries

Trade credits substitution during crisis period: spatial aspects within developing countries The purpose of this study is to empirically test the hypothesis about substitution of trade and bank credits during the crisis period among 1,570 firms from 16 developing countries.Design/methodology/approachThe study examines the dynamics of trade credits, following previous studies with special emphasis on the research by Love et al. (2007). The foregoing methodology was expanded by taking into account the effects of the interdependence between firms by means of spatial panel model.FindingsThe study reveals that, taking into account spatial effects, there is a positive relationship between bank and trade credits, that is, they behave as complements for each other. Significant positive spatial correlation, obtained for the firms within the same country or cluster, points to the presence of externalities inside these groups. The latter implies that neighboring firms demonstrate similar unidirectional dynamics of trade credits.Originality/valueResults of this study may create a basis for policy implementation in the sphere of corporate lending, and allow to build appropriate supporting policies during crisis period. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Economic Studies Emerald Publishing

Trade credits substitution during crisis period: spatial aspects within developing countries

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Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
0144-3585
DOI
10.1108/jes-08-2018-0290
Publisher site
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Abstract

The purpose of this study is to empirically test the hypothesis about substitution of trade and bank credits during the crisis period among 1,570 firms from 16 developing countries.Design/methodology/approachThe study examines the dynamics of trade credits, following previous studies with special emphasis on the research by Love et al. (2007). The foregoing methodology was expanded by taking into account the effects of the interdependence between firms by means of spatial panel model.FindingsThe study reveals that, taking into account spatial effects, there is a positive relationship between bank and trade credits, that is, they behave as complements for each other. Significant positive spatial correlation, obtained for the firms within the same country or cluster, points to the presence of externalities inside these groups. The latter implies that neighboring firms demonstrate similar unidirectional dynamics of trade credits.Originality/valueResults of this study may create a basis for policy implementation in the sphere of corporate lending, and allow to build appropriate supporting policies during crisis period.

Journal

Journal of Economic Studies – Emerald Publishing

Published: Apr 6, 2020

Keywords: Trade credit; Crisis; Bank credit; Spatial panel

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