The Determinants of Trade Credit Demand: An Empirical Study from Cameroonian Firms

Abstract

Research on trade credit has been growing in recent years, contributing to our understanding of the phenomenon. However, the main problem is probably the impact of the contingent nature of the payment practices used by companies. The purpose of this paper is to address the determinants of trade credit in the Cameroonian context. Based on a sample of 65 Cameroonian companies observed in 2006, the econometric investigations highlight a genuine financial intermediation business close to productive activity. We used a general model incorporating both financial variables, transactional and sociocultural in order to estimate the joint effect of all explanatory variables on the trade credit which is a kind of investment in business relationship. Logistic regression results confirmed the positive and significant correlation between rationing and trade credit. There is also apparent influence of contingency factors on sociocultural commercial time through social capital and ethnicity of trade and investment partners. Moreover the manager share of capital positively influences the duration of the trade credit where as the financial motive is one that mostly influences to the companies' behavior. [{PUBLICATION} {ABSTRACT}]