Trust and the Provision of Trade Credit
By Wenfeng Wu, Michael Firth, Oliver M. Rui. 2014
484 citations recorded by the source corpus.
State-controlled listed firms in China receive preferential treatment when borrowing from commercial banks; in contrast, private controlled firms rely on informal finance and on trade credit. We argue for and find evidence that private firms located in higher social trust regions use more trade credit from suppliers, extend more trade credit to customers, and collect receivables and pay payables more quickly. These findings are enhanced for firms located in provinces with weak protection of property rights. Our results are robust to different measures of social trust, legal environment, and endogeneity. Overall, our results show that social trust helps private firms overcome institutional difficulties in financing their activities.
Subfields: Accounting, Economics and Econometrics
View Paper: https://www.semanticscholar.org/paper/a7781c841b7c0b18b724472abcb4fd190cff790a
How researchers see this paper
The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.
In Accounting
In Economics and Econometrics
Citations in the corpus
- The effect of government quality on corporate cash holdings (2014, unknown): “As a result, it is possible for firms to use more trade credit such as accounts payable as a source of short-term finance (Wu et al., 2014).”
- Corporate Social Responsibility, Institutional Environments, and Tax Avoidance: Evidence from a Subnational Comparison in China (2017, background): “Therefore, in institutionally weak regions where trust is low and corruption is high (Cai et al., 2011; Li & Ma, 2015; Wu et al., 2014), firms may not view CSR as the best way to accomplish social responsibility goals.”
- Trust and stock price crash risk: evidence from China (2017, methodology): “The first proxy, TRUST1 , is taken rom a survey by the Chinese Enterprise Survey System across hina in 20 0 0; it measures the perceived provincial trustworthiess by companies located in the thirty-one provinces of China e.g., Zhang and Ke, 2002; Wu et al., 2014 ; and Ang et al., 015 ).”