Punishment for violations and trade credit for interlocked firms

Yang Lu, Xiangge Meng and Haitao Song

Pacific-Basin Finance Journal, 2025, vol. 92, issue C

Abstract: Taking all A-share listed firms in China from 2007 to 2019 as the research sample, based on the perspective of interlocking director network, we examine the spillover effect of punishment for violations on interlocked firms with interlocking directors, and investigate the impact and mechanism on the trade credit of interlocked firms. We found that there is a significant negative correlation between the punishment for violations of listed firms and the punishment for violations of interlocked firms, indicating that the punishment for violations has a spillover effect among interlocked firms. Punishment for violations of listed firms can significant improve the trade credit of interlocked firms. Further analysis results of its mechanism show that bank credit plays a mediating role in the impact of the punishment for violations of listed firms on the trade credit of interlocked firms. Further analysis results of the influencing factors of difference show that the impact of punishment for violations on the trade credit of interlocked firms have a time effect. Furthermore, the types of punishment for violations, the director network centrality and the property nature play heterogeneous roles in the impact of punishment for violations of listed firms on the trade credit of interlocked firms. The paper verifies the spillover effect of punishment for violations, and provides some useful enlightenment for listed firms to understand and avoid punishment for violations and improve access to trade credit.

Keywords: Punishment for violations; Trade credit; Bank credit; Interlocking director network; Spillover effect (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:92:y:2025:i:c:s0927538x25001623

DOI: 10.1016/j.pacfin.2025.102825

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