Financial constraints and trade credit: Evidence from Ethiopian firms

Figures & data

Table 1. Summary statistics

Variables	Mean	Std. Dev.	Min	Max
trade-credit	0.14	0.27	0.00	1.00
credit-constraint	0.45	0.50	0.00	1.00
finance-obstacle	0.30	0.46	0.00	1.00
firm-age	14.60	11.70	0.10	90.00
experience	14.06	9.94	0.00	60.00
sales-level (in millions)	4.720	2.460	0.00	22.670
export-share	0.06	0.21	0.00	1.00
import-share	11.57	27.13	0.00	100.00
inventory-days	27.26	55.17	0.00	365.00
investment	0.39	0.49	0.00	1.00
profit-margin	0.14	0.22	−4.33	0.25
innovation	0.40	0.49	0.00	1.00
domestic-firm	0.87	0.33	0.00	1.00
foreign-firm	0.07	0.26	0.00	1.00
manufacturing	0.44	0.50	0.00	1.00
retail	0.24	0.43	0.00	1.00

Source: Authors’ calculation from WBEES of 2011 and 2015.

Table 2. Fractional probit model estimation results

Dependent variable: trade-credit
	[A]		[B]
Variables	AME	t-ratio	AME	t-ratio
credit-constraint	−0.01	−1.38
finance-obstacle			−0.01	−1.86*
firm-age	0.01	2.03**	0.01	2.34**
experience	0.05	2.01**	0.07	2.07**
sales-level	0.00	1.07	0.00	−1.41
export-share	−0.02	−1.68	−0.01	−1.41
import-share	0.03	−2.79**	0.04	−2.89**
inventory-days	0.01	1.91*	0.01	1.86*
investment	0.06	4.89***	0.06	4.98***
profit-margin	−0.04	−2.19**	−0.05	−2.58**
innovation	0.11	1.73*	0.13	1.79*
domestic-firm	−0.02	−1.59	−0.02	−1.70
foreign-firm	−0.02	−1.53	−0.02	−1.53
manufacturing	−0.01	−1.49	−0.01	−1.36
retail	−0.01	−1.43	−0.01	−1.43
observations	1,151		1,151
R^2	0.438		0.445
RESET	0.663 (0.790)		0.714 (0.832)

AME denotes the average marginal effects. *,**. And *** denote statistical significance at 10%, 5%, and 1% respectively. t-ratios are estimated from heteroskedasticity robust standard errors. All regressions include year fixed effects.

Table 3. Control function estimation results

Dependent variable: trade-credit
	[A]		[B]
Variables	AME	t-ratio	AME	t-ratio
credit-constraint	−0.10	−2.42**
finance-obstacle			−0.18	−2.26**
firm-age	0.01	2.77**	0.01	2.19**
experience	0.04	2.67**	0.03	2.14**
sales-level	0.00	−0.34	0.00	−0.51
export-share	−0.03	−0.76	−0.01	−0.27
import-share	−0.06	−2.82**	−0.08	−2.99***
inventory-days	0.00	0.80	0.00	1.10
investment	0.06	3.08***	0.06	3.50***
profit-margin	−0.04	−2.71**	−0.04	−2.68**
innovation	0.01	1.73*	0.01	2.51**
domestic-firm	−0.01	−0.15	0.00	−0.13
foreign-firm	−0.01	−0.16	−0.02	−0.47
manufacturing	−0.01	−0.22	0.00	−0.07
retail	−0.01	−0.29	0.00	0.11
generalized-residual	0.04	0.39	0.07	1.18
observations	1,151		1,151

AME denotes the average marginal effects. *,**. And *** denote statistical significance at 10%, 5%, and 1% respectively. t-ratios are estimated from bootstrapped standard errors that allows for intra-industry correlation. All regressions include year fixed effects.

Table 4. Heteroskedasticity-based estimation results

Dependent variable: trade-credit
	[A]		[B]
Variables	coeff	t-ratio	coeff	t-ratio
credit-constraint	−0.09	−2.06**
finance-obstacle			−0.12	−2.22**
firm-age	0.01	2.02**	0.01	2.19**
experience	0.00	0.92	0.00	1.00
sales-level	0.00	0.13	0.00	−0.52
export-share	−0.02	−0.56	−0.01	−0.37
import-share	−0.04	−1.94*	−0.07	−1.98**
inventory-days	0.00	0.92	0.00	0.97
investment	0.07	3.52***	0.07	3.93***
profit-margin	−0.06	−2.17**	−0.06	−2.24**
innovation	0.01	1.80*	0.01	1.78*
domestic-firm	−0.02	−0.34	0.00	−0.11
foreign-firm	−0.02	−0.30	−0.01	−0.26
manufacturing	−0.02	−0.61	−0.01	−0.33
retail	−0.01	−0.56	0.00	−0.04
observations	1,151		1,151

*, ** and *** denote statistical significance at 10%, 5%, and 1% respectively. t-ratios are estimated from bootstrapped standard errors that allows for intra-industry correlation. All regressions include year fixed effects.

Table 5. Correlation between financial constraint and trade credit supply

	credit-constraint	finance-obstacle	trade-credit supply
credit-constraint	1.00
finance-obstacle	0.214**	1.00
trade-credit supply	−0.133*	−0.052	1.00

**, and * shows that the correlation coefficients are significant at 5% and 10%, respectively.