Inventory investment and the choice of financing: Does financial development play a role?

Junhong Yang, Alessandra Guariglia, Yuchao Peng and Yukun Shi

Journal of Corporate Finance, 2022, vol. 74, issue C

Abstract: This paper uses a panel of 224,604 Chinese firms over the period 2004–2009 linked with a set of unique city-level financial development data to examine how financial development affects the way corporate inventory investment is financed. We find that financial development enhances the use of interest-bearing loans and discourages the use of trade credit in financing inventory investment. These effects are more pronounced after the 2007 property rights reform, as well as for privately-owned firms, small firms, firms with no political connections, and firms located in coastal regions. Our results are robust to using a variety of different specifications, as well as different measures of financial development and estimation methods.

Keywords: Financing choice; Trade credit; Interest-bearing loans; Inventories; Financial development; Financing constraints (search for similar items in EconPapers)
JEL-codes: D92 E22 G3 O16 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Working Paper: Inventory investment and the choice of financing: Does financial development play a role? (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:74:y:2022:i:c:s0929119921002613

DOI: 10.1016/j.jcorpfin.2021.102139

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