Bank Credit and Trade Credit: The Case of Portuguese SMEs from 2010 to 2019

Author:

Pinto António12ORCID,Henriques Carla13,Cardoso Carolina1,Neves Maria45ORCID

Affiliation:

1. School of Technology and Management of Viseu, Polytechnic Institute of Viseu, 3500-510 Viseu, Portugal

2. CISeD—Research Center in Digital Services, 3500-510 Viseu, Portugal

3. CMUC—Centre for Mathematics of the University of Coimbra, 3000-143 Coimbra, Portugal

4. Coimbra Business School|ISCAC, Polytechnic of Coimbra, 3045-601 Coimbra, Portugal

5. UTAD|CETRAD, Centre for Transdisciplinary Development Studies, 5000-801 Vila Real, Portugal

Abstract

Small companies face significant difficulties in accessing finance, and the use of bank credit and trade credit are the primary sources of financing, specifically in small countries, with little market liquidity, and focused on the banking system, as is the case of Portugal. The main objective of this article is to identify significant drivers of bank and trade credit, as well as investigate the complementary or substitutive relationship between them, considering that both constitute an essential source of financing for small and medium-sized enterprises (SMEs). The sample comprises 5860 companies, and the analysis was performed using panel data methodology (2010–2019). The results suggest that, during the period in which the financial crisis was most felt in the country (2010–2013), companies intensified their demand for trade credit, and in the following years for bank credit. Our evidence does support the substitution hypothesis between trade and bank credit.

Funder

National Funds through the FCT—Foundation for Science and Technology

Research Center in Digital Services

Instituto Politécnico de Viseu

Center for Mathematics of the University of Coimbra

Portuguese Government through FCT/MCTES

national funds, through the FCT—Portuguese Foundation for Science and Technology

Publisher

MDPI AG

Subject

Finance,Economics and Econometrics,Accounting,Business, Management and Accounting (miscellaneous)

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