Monitoring attention of institutional investors and trade credit financing

Xiaoxiao He and Cai Liu

Finance Research Letters, 2023, vol. 55, issue PB

Abstract: This paper examines the effect of the monitoring attention of institutional investors on firms’ trade credit financing. We document that trade credit financing is positively affected by the monitoring attention of the firm's institutional owners. Notably, only institutional investors with the highest monitoring attention can positively affect the firm's account payables, which is consistent with the intervention channel. Meanwhile, institutional investors with low monitoring attention negatively affect trade credit financing, which is consistent with the exit channel of institutional investors. Our findings support the view that the efficacy of institutional monitoring mainly depends on the ownership held by motivated monitoring institutions.

Keywords: Trade credit; Institutional investor; Monitoring attention (search for similar items in EconPapers)
JEL-codes: G23 G30 G32 G34 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:55:y:2023:i:pb:s1544612323003793

DOI: 10.1016/j.frl.2023.104007

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