 Geographic proximity and trade credit: Evidence from a quasi-natural experimentCaiyue Ouyang, Jiacai Xiong, Li Liu and Jun Yao Journal of Corporate Finance, 2024, vol. 84, issue C Abstract: This paper examines the impact of geographic proximity on suppliers' decisions to provide trade credit to their customers. To establish a causal relationship, we utilize the implementation of high-speed rail (HSR) services in China as a quasi-natural experiment. Our findings reveal a significant increase in trade credit received by firms after introducing HSR services. We propose and test three mechanisms to elucidate the influence of proximity on trade credit provision: the enhanced convenience for acquiring soft information, heightened competition among suppliers, and the potential development of social trust. Empirical evidence strongly supports the first two mechanisms, underscoring their importance in shaping trade credit decisions. However, limited evidence is found regarding the role of social trust. These findings contribute to understanding the complex interplay between geographic proximity, trade credit, and supplier decision-making processes. Keywords: Trade credit; Geographic proximity; Soft information; Supplier competition; Social trust; High-speed rail (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:84:y:2024:i:c:s0929119923001840 DOI: 10.1016/j.jcorpfin.2023.102535 Access Statistics for this article Journal of Corporate Finance is currently edited by A. Poulsen and J. Netter More articles in Journal of Corporate Finance from Elsevier |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.