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The role of customer stability in corporate trade credit provision

Author

Listed:
  • Chao, Youcong
  • Hu, Fang
  • Yan, Guowan
  • Yang, Jing

Abstract

This study examines the role of customer stability, defined as the persistence of a firm's major customer relationships, in shaping corporate trade credit financing, using a large sample of Chinese A-share listed firms from 2007 to 2023. We find that firms with more stable customer relationships receive significantly greater trade credit from suppliers, as measured by accounts payable scaled by total assets. Mechanism tests reveal that customer stability enhances trade credit access by reducing demand uncertainty, mitigating information asymmetry, and strengthening firms' bargaining power. Cross-sectional analyses further show that the effect is more pronounced among firms with higher customer concentration, greater financial constraints, and during periods of elevated economic policy uncertainty. Our findings provide implications on supply chain finance by highlighting the importance of downstream relational stability in upstream financing decisions, particularly in institutional environments where informal financing plays a critical role.

Suggested Citation

  • Chao, Youcong & Hu, Fang & Yan, Guowan & Yang, Jing, 2026. "The role of customer stability in corporate trade credit provision," Pacific-Basin Finance Journal, Elsevier, vol. 99(C).
    • Handle: RePEc:eee:pacfin:v:99:y:2026:i:c:s0927538x26001642
    DOI: 10.1016/j.pacfin.2026.103218
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    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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