The relationship between trade credit, bank credit and financial structure: from firm-level non-linearities to financial development heterogeneity. A study on MENA firm-level data.

Using a database of more than 1,100 firms in the MENA region, this article looks at the determinants of demand for trade credit, particularly access to bank credit, size, age and the quality of the firm's financial structure. We show that the difficulty of gaining acces to bank credit positively influences the use of trade credit, and thus demonstrate the substitutability of bank credit and trade credit. Besides, firm's non-financial characteristics, namely age and size do not influence similarly the probability of having trade credit and the volume of trade credit raised. Additional investigations strongly support the existence of non-linearities in the relationship between trade credit and firm's financial structure and size. Finally, financial development emerges as a key feature of the demand for trade credit. Indeed, we show that most firm-level characteristics lose their influence on trade credit when financial development is high enough. With financial development, trade credit gets primarily driven by trade relationships and does not appear any more as a palliative solution when bank credit access is difficult.