Factors in the Development of Trade Credit: Case Study of Provinces in China

Go Yano and Maho Shiraishi

Emerging Markets Finance and Trade, 2014, vol. 50, issue 2S, 114-134

Abstract: Using Chinese province-level panel data for 2001-9, we investigate significant factors for the development of financial intermediation via trade credit in developing economies. First, we confirm that a competitive market environment, a well-functioning legal system, and greater bank loans for non-state-sector firms promote the development of trade credit in China. Conversely, corruption hinders its development. Second, we find that proper functioning of the legal system and bank lending to non-state-sector firms are highly likely to be the causes of the complex relationships between these determinants. Finally, we observe that an increase in the number of lawyers effectively improves the quality and function of the legal system, which, in turn, alleviates the harmful influence of corruption on trade credit development.

Keywords: bank loans for non-state-sector firms; competitive market; corruption; trade credit development in China; well-functioning legal system (search for similar items in EconPapers)
Date: 2014
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