Boardroom attributes and trade credit under different ownership structures

• Date: 01 May 2020
• Author: Amal Hamrouni,Ramzi Benkraiem,Ali Uyar,Anthony Miloudi
• DOI: http://doi.org/10.1002/jsc.2338
• Published date: 01 May 2020

RESEARCH ARTICLE

Boardroom attributes and trade credit under different

ownership structures

Ramzi Benkraiem

1

| Amal Hamrouni

2

| Anthony Miloudi

3

| Ali Uyar

2

1

Audencia Business School, Nantes, France

2

La Rochelle Business School, La Rochelle,

France

3

CRIEF University of Poitiers, Poitiers, France

Correspondence

Ramzi Benkraiem, Audencia Business School,

8 Route de la Jonelière, 44312 Nantes Cedex

3, France.

Email: rbenkraiem@audencia.com

Abstract

The effects of boardroom attributes on trade credit may differ depending on the

types of ownership structures. The study provides new evidence on simultaneously

four categories of boardroom characteristics (i.e., the board size, independence, assi-

duity, gender diversity) under different ownership structures. The empirical analysis

shows that board independence is positively associated with trade credit for firms

with dispersed and managerial ownership, whereas it is negatively associated with

trade credit for firms with concentrated ownership. Moreover, the presence of

women on boards is negatively linked to trade credit regardless of the ownership

structure, which suggests the risk-averse tendency of female directors.

KEYWORDS

boardroom attributes, ownership structure, trade credit

1|INTRODUCTION

Trade credit is commercial financing in which a supplier allows a

customer to purchase goods and/or services on the account without

making immediate payments. It has a short maturity and is associ-

ated with few formal restrictions (Hwang & Im, 2013). It is an impor-

tant external source of funds used by firms (Rajan & Zingales, 1995).

Trade credit is generally a substitute for unavailable bank credit

(Canto-Cuevas, Palacin-Sanchez, & Di Pietro, 2016; Casey &

O'Toole, 2014; Petersen & Rajan, 1997) and is cheaper than bank

credit (Burkart & Ellingsen, 2004). For all these reasons, trade credit

is considered as one of the essential types of low-risk and short-

term debt in the capital structure literature (Giannetti, Burkart, &

Ellingsen, 2011; Ndaki, Beisland, & Roy, 2018).

How do the board structure and ownership structure affect cor-

porate trade credit utilization? This issue remains mostly unanswered

in continental Europe and especially in France (Allemand, Brullebaut,

Galia, & Zenou, 2017). A limited number of studies provide empirical

evidence that board structure and ownership structure matter in

short-term debt decisions. Recently, Zhai and Ma (2017) emphasize

that ownership concentration leads firms to have less access to bank

credit. In this context, firms tend to use more trade credit as a substi-

tute. This finding is consistent with the theory that closely held firms

make greater use of trade credit (Bastos & Pindado, 2007).

This paper aims at enriching this limited previous research by

providing new evidence on the relationships between boardroom

attributes and trade credit under different ownership structures in

a continental European context, that is, France. Concretely, we

consider four boardroom attributes (i.e., the board size, indepen-

dence, assiduity, and gender diversity) under four ownership struc-

tures (i.e., dispersed, concentrated, managerial, and family

ownerships).

2|DATA, VARIABLES, AND

METHODOLOGY

2.1 |Data and variables

The financial variables come from the Thomson One Banker,

Datastream, and Diane databases. The data on boardroom attributes

are from INSEAD OEE Data Services and firms' annual reports. Our

initial sample contains French firms listed on the SBF120 index from

2008 to 2016. After deleting the firms in which data for the variables

JEL classification codes: G30, G32, G34.

DOI: 10.1002/jsc.2338

Strategic Change. 2020;29:407–410. wileyonlinelibrary.com/journal/jsc © 2020 John Wiley & Sons, Ltd. 407