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Monitoring attention of institutional investors and trade credit financing

Author

Listed:
  • He, Xiaoxiao
  • Liu, Cai

Abstract

This paper examines the effect of the monitoring attention of institutional investors on firms’ trade credit financing. We document that trade credit financing is positively affected by the monitoring attention of the firm's institutional owners. Notably, only institutional investors with the highest monitoring attention can positively affect the firm's account payables, which is consistent with the intervention channel. Meanwhile, institutional investors with low monitoring attention negatively affect trade credit financing, which is consistent with the exit channel of institutional investors. Our findings support the view that the efficacy of institutional monitoring mainly depends on the ownership held by motivated monitoring institutions.

Suggested Citation

  • He, Xiaoxiao & Liu, Cai, 2023. "Monitoring attention of institutional investors and trade credit financing," Finance Research Letters, Elsevier, vol. 55(PB).
    • Handle: RePEc:eee:finlet:v:55:y:2023:i:pb:s1544612323003793
    DOI: 10.1016/j.frl.2023.104007
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    References listed on IDEAS

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    More about this item

    Keywords

    Trade credit; Institutional investor; Monitoring attention;
    All these keywords.

    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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