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Do Trade Credit and Bank Credit Complement or Substitute Each Other in Public and Private Firms?

Afrifa, G.A, Tingbani, I., Alshehabi, A., Halabi, H. (2023) Do Trade Credit and Bank Credit Complement or Substitute Each Other in Public and Private Firms? International Review of Economics & Finance, 88 . pp. 748-765. ISSN 1059-0560. (doi:10.1016/j.iref.2023.07.017) (KAR id:103468)

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.

Item Type: Article
DOI/Identification number: 10.1016/j.iref.2023.07.017
Uncontrolled keywords: trade credit, short-term bank credit, public firms, and private firms
Subjects: H Social Sciences > HG Finance
Divisions: Divisions > Kent Business School - Division > Department of Accounting and Finance
Funders: University of Kent (https://ror.org/00xkeyj56)
Depositing User: Godfred Afrifa
Date Deposited: 27 Oct 2023 07:21 UTC
Last Modified: 08 Jan 2024 17:59 UTC
Resource URI: https://kar.kent.ac.uk/id/eprint/103468 (The current URI for this page, for reference purposes)

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