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Institutional innovation and interfirm finance: The impact of smart city pilots on trade credit

Author

Listed:
  • Li, Ouyang
  • Zhang, Yefeng
  • Shen, Zijian
  • Wang, Jingyi

Abstract

This paper examines the impact of China's Smart City Pilot (SCP) program on firms' access to trade credit. Using a multi-period difference-in-differences design and a dataset on Chinese A-share listed firms from 2008 to 2019, we find that SCP implementation significantly increases firms' trade credit financing. Mechanism analyses suggest that this effect operates through two channels: improved information environments that mitigate supplier–buyer information asymmetry, and human capital upgrading that enhances firms' operational efficiency and repayment capacity. The effect is stronger in cities with more advanced digital infrastructure and among firms with lower internal digitalization, consistent with external digital improvements substituting for firm-level weaknesses. Moreover, the effect is concentrated in non-state-owned enterprises, which face tighter financial constraints and greater reliance on supplier credit. Our findings highlight the role of institutional innovations in shaping interfirm financing and reveal a novel channel through which smart city initiatives affect corporate financial decisions.

Suggested Citation

  • Li, Ouyang & Zhang, Yefeng & Shen, Zijian & Wang, Jingyi, 2026. "Institutional innovation and interfirm finance: The impact of smart city pilots on trade credit," Pacific-Basin Finance Journal, Elsevier, vol. 97(C).
    • Handle: RePEc:eee:pacfin:v:97:y:2026:i:c:s0927538x26000284
    DOI: 10.1016/j.pacfin.2026.103082
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    JEL classification:

    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D25 - Microeconomics - - Production and Organizations - - - Intertemporal Firm Choice: Investment, Capacity, and Financing

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