Market Power,Trade Credit And Its Credit Conduction Effect

Trade credit has a long developing history and plays an important role in thegrowth of companies. Trade credit is not only a kind of trading activity, but also akind of borrowing. From the aspect of transaction, it is a way of trade due to theasynchrony of the use value and its inner value. From the aspect of debt, it is ashort-term and a way of direct financing as a result of trading in advance or delay thepayment in the deal. Its distribution between enterprises must have its unique anddeepen regularity. For those reason above, this paper will based on the data of A-sharelisted companies from2010to2012in order to investigate the influence of marketpower on the trade credit and its credit conduction effect.The paper’s result shows that the enterprises with relative stronger market powerare able to obtain more trade credit, but there does not exist a certain relation betweenthe trade credit and the lowers. Under the other condition in the same situation, thebank credit has the relationship of “substitution effect” with the gain of trade credit,in the other hand, it has the relationship of “transfer effect” with the supply of thetrade credit. Further analysis shows that, the “substitution effect” between trade creditand bank credit is more significant in the enterprises with relative stronger marketpower; On the contrary, the “transfer effect” between trade credit and bank credit ismore significant in the lowers. Above the analysis, This finding implies the financingdifficulties of the enterprises which has the status of lower market power, especiallythe financing difficulties of small and medium-sized enterprises.This paper tentatively divides trade credit into three types: the gain of tradecredit, the supply of the trade credit and the net of trade credit. With the introductionof HHI index, this paper points out the existence of “substitution effect” and “transfereffect”, what’s more, the result presents peculiarity according to the different marketpower of our country enterprises. The conclusion shows that the competitivehypothesis predominate in the research of the credit conduction effect in trade creditfield. Through theoretical deduction and empirical test, this paper points out theimprovement of technology and innovation is an effective way to get rid of excessive dependence on trade credit of the small-sized enterprises and points out the necessityof improving the financing environment. Also this paper will provide micro-levelempirical support for the development of our country’s multilevel capital market.