Abstract
In order to carry out the business operation , previous researchers have found that
Pakistani firms are relying on both sources of short term financing and trade credit is as
important as bank credit but the nature of relationship between two is yet to be explored.
Be keeping in view this gap in previous researches, the current study aims to explore
whether there is a substitution relationship or complementary relationship between these
two modes of short term financing. For this purpose, data was collected for 167
manufacturing firms listed at Pakistan Stock Exchange for the period 2005 to 2016.
Using dynamic panel estimation, the study verifies the substitution effect of bank
borrowings and trade credit financing whereas size and inventory turnover were control
variables and found to be positively related. This study also examined the impact of
previous period trade credit and found to have a positive relationship which suggests that
credit relationships do matter for short term financing. The results of the study are useful
to academic researchers and managers in specific areas of trade credit management.
Ammara Mubashar, Sumayya Chughtai, Abdul Raheman. (2018) nalysis of Trade Credit as an Alternate Source of Financing: Evidence from NonFinancial Sector of Pakistan, NUML International Journal of Business & Management, Volume 13, Issue 2.
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