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COVID-19 pandemic and corporate liquidity: The role of SOEs’ trade credit response

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  • Wang, Xun
  • Yu, Jingwen

Abstract

Although state-owned enterprises are associated with less efficiency and lead to resource misallocation, they may have stabilizing effect in face of a crisis. Exploiting the COVID-19 pandemic as a natural experiment, we study the role of firm ownership in trade credit provision and find robust evidence that SOEs increase their trade credit to downstream firms more than non-SOEs after the outbreak of the pandemic. Moreover, we explore the underlying mechanism and find that better financing ability and multitask of the SOEs contribute to greater trade credit during the pandemic, and the latter plays a more active role. Further analyses show that SOEs’ advantage in trade credit extension is more pronounced in industries with higher external financial dependence and provinces with a higher level of government involvement. Our paper provides new insights into the real effects of SOEs on the economy.

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  • Wang, Xun & Yu, Jingwen, 2023. "COVID-19 pandemic and corporate liquidity: The role of SOEs’ trade credit response," Journal of International Money and Finance, Elsevier, vol. 137(C).
    • Handle: RePEc:eee:jimfin:v:137:y:2023:i:c:s026156062300102x
    DOI: 10.1016/j.jimonfin.2023.102901
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    More about this item

    Keywords

    COVID-19; Firm ownership; Trade credit; State-owned enterprises; Chinese economy;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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