Trade credits substitution during crisis period : spatial aspects within developing countries

Purpose: The purpose of this study is to empirically test the hypothesis about substitution of trade and bank credits during the crisis period among 1,570 firms from 16 developing countries. Design/methodology/approach: The study examines the dynamics of trade credits, following previous studies with special emphasis on the research by Love et al. (2007). The foregoing methodology was expanded by taking into account the effects of the interdependence between firms by means of spatial panel model. Findings: The study reveals that, taking into account spatial effects, there is a positive relationship between bank and trade credits, that is, they behave as complements for each other. Significant positive spatial correlation, obtained for the firms within the same country or cluster, points to the presence of externalities inside these groups. The latter implies that neighboring firms demonstrate similar unidirectional dynamics of trade credits. Originality/value: Results of this study may create a basis for policy implementation in the sphere of corporate lending, and allow to build appropriate supporting policies during crisis period.