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

    Access Status
    Fulltext not available
    Authors
    Machokoto, Michael
    Mahonye, Nyasha
    Makate, Marshall
    Date
    2021
    Type
    Journal Article
    
    Metadata
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    Citation
    Machokoto, M. and Mahonye, N. and Makate, M. 2021. Short-term financing sources in Africa: Substitutes or complements? Research in International Business and Finance. 60: ARTN 101572.
    Source Title
    Research in International Business and Finance
    DOI
    10.1016/j.ribaf.2021.101572
    ISSN
    0275-5319
    Faculty
    Faculty of Health Sciences
    School
    Curtin School of Population Health
    URI
    http://hdl.handle.net/20.500.11937/92264
    Collection
    • Curtin Research Publications
    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.

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