Short-term financing sources in Africa: Substitutes or complements?

Michael Machokoto, Nyasha Mahonye, Marshall Makate

Research output: Contribution to journalArticlepeer-review


Using panel vector autocorrelation models (Panel VaR), we examine the dynamic interrelationships between short-term financing sources for a large sample of 8,464 firm-year observations from seven understudied developing economies over the period 1991-2015. On average, we find that short-term debt and trade credit are complements, while cash holdings are substitutes for short-term debt and trade credit. However, our further analyses show that the interrelationships between short-term financing sources are strong and significant before the financial crisis but diminish thereafter with contractions in credit supply. These changes highlight the impact of credit supply shocks on short-term financing policies of firms domiciled in less-developed capital markets. As firms in Africa, an exemplary less-developed capital market context, rely heavily on short-term financing sources, the dynamic interrelationships we document have important implications that are of interest to academics, practitioners, and policymakers alike.
Original languageEnglish
Pages (from-to)1-18
Number of pages18
JournalResearch in International Business and Finance
Publication statusAccepted/In press - 29 Nov 2021


  • Short-term finance
  • Africa
  • Trade credit
  • Short-term debt
  • Financial crisis
  • Emerging markets

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