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Political affiliation and trade credit extension by Chinese firms

  • Alessandra Guariglia
  • Simona Mateut

This paper examines the role of political affiliation in the extension of trade credit by Chinese firms. Using a dataset of over 70,000 firms over the period 2000-2007, we find that, because they benefit from easier access to short-term external funding, politically affiliated firms can extend more trade credit to their business partners than their non-affiliated counterparts. In other words, politically affiliated firms redistribute bank funding via trade credit. Furthermore, the sensitivity of trade credit extension to short-term debt is largest for non-affiliated private firms producing differentiated goods, which are more constrained in their access to external funding.

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File URL: http://www.nottingham.ac.uk/gep/documents/papers/2011/11-12.pdf
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Paper provided by University of Nottingham, GEP in its series Discussion Papers with number 11/12.

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Handle: RePEc:not:notgep:11/12
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