Impact of financial development and credit information sharing on the use of trade credit: Empirical evidence from Pakistan

Figures & data

Table 1. One-way ANOVA of TCU

H0= Means are equal over years				H0 = Means are equal across industries
Year	No. of firms	Mean	SD	Sectors	No. of firms	No of obs.	Mean	SD
2005	327	0.1335	0.1370	Textiles	133	1463	0.1255	0.1246
2006	327	0.1239	0.1267	Sugar	32	352	0.1347	0.1391
2007	327	0.1331	0.1317	Other food pro.	15	187	0.1202	0.1777
2008	327	0.1360	0.1229	Chemicals & pharma.	37	407	0.1261	0.1812
2009	327	0.1241	0.1371	Manufacturing	26	286	0.1074	0.1353
2010	327	0.1184	0.1458	Cement	18	198	0.2041	0.2061
2011	327	0.1186	0.1473	Other nonmetallic mineral products	06	66	0.1721	0.1826
2012	327	0.1300	0.1648	Motor vehicles, and auto parts	20	231	0.1100	0.1302
2013	327	0.1267	0.1737	Fuel energy	14	154	0.1202	0.1066
2014	327	0.1314	0.1420	Petroleum products	9	99	0.0567	0.0478
2015	327	0.1193	0.1376	Paper and others	9	77	0.0903	0.0984
				Electrical machin.	8	88	0.1697	0.1219
Total	3597	0.1268	0.1438		327	3597	0.1271	0.1438
Analysis of Variance				Analysis of Variance
F-value			0.6600	F-value		8.4300
Prob > F			0.7297	Prob > F		0.0000
Critical F-statistic at the 0.05 significance level			3.0302	Critical F-statistic at the 0.01 significance level		4.6870

Critical F-statistic at the 0.05 significance level is 3.030248; Critical F-statistic at 1% significance level is 4.687072.

Table 2. Descriptive analysis

Variable	Mean value	Standard deviation	Mini. value	Maxi. value
TCU	0.1271	0.1438	0.0212	0.7986
TCE	0.1073	0.1128	0.0103	0.9865
SBC	0.2714	0.3440	0.0000	3.9511
SG	0.1547	0.3214	−0.5737	0.9133
PR	0.0575	0.1581	−0.6332	0.6132
SIZ (Thousand Rs.)	8,889,201	28,756,432	1,263	410,486,745
ST	0.1790	0.1196	0.0005	1.5937
RLIQ	0.4916	0.5771	0.02	2.82
COLLA	0.4773	0.2161	0.0462	0.8695
FL	1.683	1.9388	−4.17	6.63
DFIs	0.23034	0.04883	0.1603	0.2873
DFM	0.2417	0.08631	0.1495	0.3725
LR	12.5852	1.7070	9.0716	14.5375
CIS	0.04844	0.02637	0.003	0.08

Source: Author self-calculation; No. of firms = 327; Years = 11; No. of firm year observations: 3597.

TCU: trade credit financing; TCU_t-1: trade credit used in year t-1. TCE: trade credit extended; SBC: short-term bank credit; SG: sales growth rate; PR: profitability of a firm; SIZ: size of a firm; ST: stock in trade; RLIQ: relative liquidity position; COLLAT: value of collateral; FL: financial leverage; DFI: depth of financial institutions; DFM: depth of financial market; LR: lending rate; CIS: credit information sharing.

Table 3. Harris–Tzavalis panel unit root test for trade credit used

Variables	Rho statistics	Z	Order of integration
TCE	0.4477	−15.1221***	0
TCU	0.4606	−14.3495***	0
SBC	0.5813	−7.1126***	0
SG	−0.0341	−43.9959***	0
PR	0.2949	−24.2798***	0
SIZ	0.3851	−18.8718***	0
ST	0.4566	−14.5871***	0
RLIQ	0.3248	−22.4839***	0
COLLA	0.4818	−13.0736***	0
FL	0.4208	−16.7326***	0
DFIs	0.9346	−7.0976***
DFM	0.8917	−11.7460***
LR	0.5317	−10.0886***
CIS	0.1673	−7.1171***

***p < 0.01; **p < 0.05; *p < 0.10.

Table 4. Pairwise correlation matrix for trade credit used

Variable	TCU	TCUt-1	TCE	SBC	SG	PR	SIZ	ST	RLIQ	COLLA	FL	DFI	DFM	LR	CIS
TCU	1
TCUt-1	0.788***	1.0000
TCE	0.2855***	0.2311***	1.000
SBC	0.5849***	0.5028***	0.2146***	1.000
SG	−0.2476***	0.0123	−0.1572***	−0.1507***	1.000
PR	−0.6026***	−0.4924***	−0.1990***	−0.4138***	0.2230***	1.0000
SIZ	0.7754***	0.6458***	0.3156***	0.5270***	−0.2294***	−0.4422***	1.000
ST	0.2896***	0.2030***	0.2265***	0.2729***	−0.1223***	−0.1986***	0.2805***	1.000
LIQ	−0.2185***	−0.2009***	0.2767***	−0.2350***	−0.0213	0.3231***	−0.0106	−0.1375***	1.000
COLLA	0.1890***	0.1915***	−0.1926***	0.1520***	0.0064	−0.2873***	0.2338***	−0.1514***	−0.4023***	1.0000
FL	−0.1312***	−0.1378***	−0.0241	0.0093	0.0598***	0.0468***	−0.1344***	0.0753***	−0.2107***	0.0071	1.000
DFIs	0.0229***	0.0227***	−0.0479***	0.0235	0.1209***	0.0581***	0.0015	0.0480***	−0.0072	0.0758***	0.0664***	1.0000
DFM	0.0241***	0.0090***	−0.0583***	0.0122	0.1293***	0.0717***	−0.0073	0.0359*	0.0066	0.0740***	0.0493***	0.8914***	1.0000
LR	−0.0228***	−0.0134	0.0505***	−0.0396*	−0.1199***	−0.0856***	−0.0010	−0.0380**	−0.0213	−0.0602***	0.0105	−0.5495***	−0.7291***	1.0000
CIS	−0.0111	−0.0216***	0.0546***	−0.0362*	−0.1817***	−0.0870***	0.0045	−0.0413**	0.0011	−0.0685***	−0.0301	−0.7940***	−0.7895***	0.7503***	1.0000
VIF		2.29	I.41	1.64	1.29	1.72	2.52	1.29	1.720	1.49	1.12	7.64	10.02	3.28	2.93
1/VIF		0.4364	0.7096	0.6101	0.7753	0.5802	0.3970	0.7774	0.5802	0.6692	0.8893	0.1309	0.0997	0.3047	0.3418
Mean VIF	2.88

***p < 0.01; **p < 0.05; *p < 0.10..

Table 5. Effects of financial development and credit information sharing on TCU

Independent variables	Exp. sign	Effect of financial development			Effect of CIS	Acceptance/rejection of hypotheses
		Model 2	Model 3	Model 4	Model 5**
TCU t-1	+	0.3697***	0.3692***	0.3686***	0.3702***
		(0.0396)	(0.0394)	(0.0394)	(0.0395)
TCE	+	0.0631***	0.0653***	0.0652***	0.0631***
		(0.0229)	(0.0232)	(0.0226)	(0.0229)
SBC	±	0.0386**	0.0387**	0.0383**	0.0387**
		(0.0174)	(0.0173)	(0.0173)	(0.0174)
SG	+/−	−0.0564***	−0.0566***	−0.0551***	−0.0565***
		(0.0074)	(0.0074)	(0.0074)	(0.0074)
PR	+/−	−0.1443***	−0.1448***	−0.1443***	−0.1437***
		(0.0260)	(0.0263)	(0.0264)	(0.0257)
SIZ	+/−	0.0487***	0.0487***	0.0489***	0.0486***
		(0.0065)	(0.0065)	(0.0065)	(0.0064)
ST	−/+	−0.0070	−0.0084	−0.0065	−0.0058
		(0.0194)	(0.0191)	(0.0193)	(0.0192)
RLIQ	+	−0.0268***	−0.0273***	−0.0272***	−0.0265***
		(0.0051)	(0.0052)	(0.0053)	(0.0051)
COLLA		−0.0394***	−0.0407***	−0.0389***	−0.0381***
		(0.0131)	(0.0133)	(0.0129)	(0.0131)
FL		−0.0026*	−0.0027*	−0.0024*	−0.0025*
		(0.0013)	(0.0013)	(0.0013)	(0.0013)
DFIs	+/−	0.0951***				Accepted
		(0.0288)
DFM	+/−		0.0885***			Accepted
			(0.0170)
LR	−/+			−0.4752***		Accepted
				(0.1169)
CIS	−				−0.2632***	Accepted
					(0.1116)
Constant		0.0217**	0.0240 ***	0.1046**	0.0591**
		(0.0101)	(0.0102)	(0.0185)	(0.0130)
Wald chi2(9) Prob > chi2		1675.69 (0.000)	1652.18 (0.000)	1500.62 (0.000)	1646.77 (0.000)
AR(1) first-order serial correlation of error term		−3.98 (0.000)	−3.97 (0.000)	−3.97 (0.000)	−4.00 (0.000)
AR(2) second-order serial correlation of error term		−0.45 (0.656)	−0.46 (0.646)	−0.45 (0.656)	−0.44 (0.658)
Hansen J statistic		320.94 (0.308)	320.38 (0.302)	322.92 (0.308)	320.39 (0.316)
No. of observations		2,943	2,943	2,943	2,943

*Significant at level 10%; **significant at level 5%; ***significant at 1%.

Heteroskedasticity robust standard errors are reported in parenthesis. The annual time coverage for all the models is 2005–2015.