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Corporate value and trade-credit policies: evidence from China

Author

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  • Umeair Shahzad
  • Lingge Zhao
  • Jing Liu
  • Fukai Luo

Abstract

This study evaluates the nexus of enterprise value and trade-credit strategies. Fixed-effects modeling is used for the baseline outcomes, and a difference-in-difference approach is applied as a quasi-natural experiment. The estimates are robust to alternative measures and distant covariates. The findings validate that enterprise value has a positive (negative) impact on trade-credit (supplies), (demand). The said effect is more pronounced in SOEs, revealing a critical role in capital mobilization. The additional analyses show that financially constrained and equity reliant firms are more likely to exploit firm value in trade-credit management. The micro aspect of this study suggests that enterprise value can allow managers to shape non-price competitive strategies and it also offers incentives to maintain financial slack. On a macro level, the study suggests that enterprise value has a critical role in capital mobilization and enhancing the purchasing power in the overall economy.

Suggested Citation

  • Umeair Shahzad & Lingge Zhao & Jing Liu & Fukai Luo, 2022. "Corporate value and trade-credit policies: evidence from China," Journal of Applied Economics, Taylor & Francis Journals, vol. 25(1), pages 412-432, December.
    • Handle: RePEc:taf:recsxx:v:25:y:2022:i:1:p:412-432
    DOI: 10.1080/15140326.2022.2045467
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    Cited by:

    1. Luo, Chunhua & Wei, Dianlong & He, Feng, 2023. "Corporate ESG performance and trade credit financing – Evidence from China," International Review of Economics & Finance, Elsevier, vol. 85(C), pages 337-351.

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