Law and borders: Entrepreneurs' immigration status and trade credit

Changqin Luo, Hanwen Sun, Guochao Yang and Bohui Zhang

Journal of Corporate Finance, 2024, vol. 87, issue C

Abstract: We examine whether the immigration status of entrepreneurs is a concern for creditors when extending trade credit. Utilizing the disclosure of overseas residence rights of controlling shareholders in China, we show that overseas residence rights negatively affect firms' ability to obtain trade credit. This negative association is attenuated if the overseas jurisdiction has an extradition treaty with China. Our results are robust to the introduction of the Hong Kong national security law as a source of exogenous variation in the boundary of domestic law. The decrease in trade credit provision is more pronounced in firms that are perceived as less trustworthy (i.e., with less social trust or higher expropriation risk). Our results offer new insights into how the reach of law across borders can affect firms' financing activities.

Keywords: Law; Borders; Immigration; Trade credit; Trust (search for similar items in EconPapers)
JEL-codes: G32 G34 (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:87:y:2024:i:c:s0929119924000683

DOI: 10.1016/j.jcorpfin.2024.102606

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