Capital Market Opening and Trade Credit Provision: Evidence from Staggered Quasi-Natural Experiments

Qiong Sun, Deshuai Hou, Shaofan Zhao and Manru Dong

Emerging Markets Finance and Trade, 2025, vol. 61, issue 13, 4206-4230

Abstract: This study finds that capital market opening significantly reduces trade credit provision, and this effect is primarily achieved by alleviating information asymmetry and enhancing product market competition. Further analysis reveals that capital market opening helps upstream firms shorten the duration of trade credit provision and decrease the net amount of trade credit provision. These findings indicate a substantial enhancement in the competitive position of firms within the supply chain. In addition, the negative association between capital market opening and trade credit provision is more pronounced for firms with share pledging, and firms with lower R&D investment. We also demonstrate that the decrease in trade credit provision, resulting from the opening of capital markets, can enhance firms’ financial performance while simultaneously mitigating operational risks.

Date: 2025
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DOI: 10.1080/1540496X.2025.2497391

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