Abstract
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 language | English |
|---|---|
| Pages (from-to) | 1-18 |
| Number of pages | 18 |
| Journal | Research in International Business and Finance |
| DOIs | |
| Publication status | Accepted/In press - 29 Nov 2021 |
Keywords
- Short-term finance
- Africa
- Trade credit
- Short-term debt
- Financial crisis
- Emerging markets