Trade Credit Financing and Firm Growth: A Panel Study of Listed Firms in Africa

Abstract

Globally, trade credit is an important element of interfirm trade among non-financial firms. In response to the limited empirical evidence on trade credit financing and firm growth nexus, especially in Africa, this chapter examines the effects of trade credit financing on firm growth in African countries. It employs a panel of publicly listed firms in nineteen African countries for the period 1998–2016 from COMPUSTAT. Due to endogeneity and non-separability concerns, the chapter employs three stage least squares estimation procedure. Trade credit financing is found to have a statistically and economically significant positive impact on firm growth in Africa. The findings are robust to different measures of firm growth and trade credit financing. Therefore, policies that facilitate trade credit activity can spur firm growth in Africa.