Empirical Study On Relationship Between Trade Credit And Bank Loan Of China’s Listed Companies

Bank loan is one of the most important debt sources for China’s enterprises. But thebank financing of many enterprises has been limited as a result of information asymmetry,financing environment, and other external factors. As another short-term debt source, tradecredit is being used by more and more enterprises. Although scholars have done manyresearches on the relation between trade credit and bank loan, they did not get the sameconclusion, since the research sample and financing environment are different. Accordingto the credit rationing theory, the bank financing constraint may result in the substitutionrelationship between trade credit and bank loan. The bank financing constraint existsgenerally in China and is different in different ownerships and regions, hence, therelationship between trade credit and bank loan may show different characteristics.This paper takes China’s listed companies as sample, covering the period from2001to2001. Firstly we analyze the bank financing, the use of trade credit and theircharacteristics in China. Then we emphasize the empirical research on relationshipbetween trade credit and bank loan, and the influence on this relationship of ownership,region development factors including finance development, law development andgovernment intervention. The results show that there exists remarkable substitutionrelationship between trade credit and bank loan, and this relationship is stronger in privatelisted companies. We also find that, in the areas with higher level of finance development,higher level of law development, and lower level of government intervention, the level oftrade credit is higher, and the relationship between trade credit and bank loan is stronger.