Trade credit and stock liquidity

Chenguang Shang

Journal of Corporate Finance, 2020, vol. 62, issue C

Abstract: This study documents that firms with higher stock liquidity are more willing to extend trade credit and are less reliant on trade credit financing. This finding is robust to a battery of control variables, alternative measures of stock liquidity, different fixed effects, an instrumental variable approach, and a difference-in-difference approach using tick-size change as a quasi-natural experiment that exogenously increases stock liquidity. Subsample analyses show that the relation between trade credit policies and stock liquidity is more pronounced for firms that are financially constrained, dependent on external financing, and restricted by short-term debt. Overall, the evidence presented in this paper indicates that access to the equity market has important implications on firms' trade credit policies.

Keywords: Trade credit; Stock liquidity; Equity financing; Financial constraints (search for similar items in EconPapers)
JEL-codes: G12 G14 G30 G32 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (27)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:62:y:2020:i:c:s0929119920300304

DOI: 10.1016/j.jcorpfin.2020.101586

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