Corporate value and trade-credit policies: evidence from China

Umeair Shahzad, Lingge Zhao, Jing Liu and Fukai Luo

Journal of Applied Economics, 2022, vol. 25, issue 1, 412-432

Abstract: This study evaluates the nexus of enterprise value and trade-credit strategies. Fixed-effects modeling is used for the baseline outcomes, and a difference-in-difference approach is applied as a quasi-natural experiment. The estimates are robust to alternative measures and distant covariates. The findings validate that enterprise value has a positive (negative) impact on trade-credit (supplies), (demand). The said effect is more pronounced in SOEs, revealing a critical role in capital mobilization. The additional analyses show that financially constrained and equity reliant firms are more likely to exploit firm value in trade-credit management. The micro aspect of this study suggests that enterprise value can allow managers to shape non-price competitive strategies and it also offers incentives to maintain financial slack. On a macro level, the study suggests that enterprise value has a critical role in capital mobilization and enhancing the purchasing power in the overall economy.

Date: 2022
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DOI: 10.1080/15140326.2022.2045467

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