The influence of regulatory intensity on corporate trade credit

Loan Quynh Thi Nguyen

Finance Research Letters, 2025, vol. 78, issue C

Abstract: This study investigates the relation between trade credit and regulatory intensity. It reveals that intensified regulations drive firms to increase trade credit, supporting the public interest theory and highlighting strategic adjustments despite higher costs. It shows that more diversified firms take advantage of risk reduction and economies of scale to extend trade credit, while high-quality auditor firms and high dividend-paying firms adopt more conservative approaches, including reducing trade credit to maintain compliance and stability. Finally, firms adjust their financial strategies by reducing cash holdings, increasing debt issuance, and reallocating resources to adapt to regulatory demands while enabling trade credit expansion.

Keywords: Regulatory intensity; Trade credit (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:78:y:2025:i:c:s1544612325004350

DOI: 10.1016/j.frl.2025.107172

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