Political affiliation and trade credit extension by Chinese firms
This paper examines the role of political affiliation in the extension of trade credit by Chinese firms. Using a dataset of over 70,000 firms over the period 2000-2007, we find that, because they benefit from easier access to short-term external funding, politically affiliated firms can extend more trade credit to their business partners than their non-affiliated counterparts. In other words, politically affiliated firms redistribute bank funding via trade credit. Furthermore, the sensitivity of trade credit extension to short-term debt is largest for non-affiliated private firms producing differentiated goods, which are more constrained in their access to external funding.
Authors: | Guariglia, Alessandra ; Mateut, Simona |
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Institutions: | Leverhulme Centre for Research on Globalisation and Economic Policy, School of Economics |
Subject: | trade credit | political affiliation | Chinese firms |
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