Climate policy uncertainty and corporate trade credit provision

This study examines how uncertainty in Chinese climate policies influences firms’ trade credit decisions. Using data from Chinese A-share listed companies between 2010 and 2022, we find that increased climate policy uncertainty is associated with reduced trade credit provision. These findings remain robust across various endogeneity tests and additional verification methods. Our analysis reveals that financial constraints, operating risk, and information opacity are three plausible channels through which climate policy uncertainty to inhibit trade credit provision. Furthermore, cross-sectional analyses demonstrate that this negative relationship is more pronounced among non-state-owned enterprises, firms with weak political connections, and companies operating in less competitive product markets. Overall, this paper advances the academic discourse on trade credit determinants and provides new insights into how climate policy uncertainty affects corporate credit provision decisions.