Determinants of trade credit supply among the Ghanaian construction sector

Abstract

Purpose – Trade credit (TC) provides access to capital for construction contractors globally and is an important source of finance in both developed and developing countries. The purpose of this paper is to explore key factors underpinning construction suppliers’ decisions to provide TC to Ghanaian construction firms. Design/methodology/approach – Primary data from a structured survey of 75 construction suppliers are analysed. Principal component (factor) analysis explores complex structures among suppliers’ decision-making variables. Findings – Underlying constructs of decision criteria exist among seven key factors: financial profile of the contractor; parties’ profit margins; asset portfolio and project particulars; TC quantum and repayment terms; age and experience of the contractor; contractor corporate image; and parties’ cash flows. Originality/value – This is a new decision criteria framework for suppliers and contractors, who utilise TC.