Regional Financial Development Trade Credit And Corporate Cash Holdings Performance

It is of great meaning for the research on regional financial development,trade credit and corporate cash holdings.Both cash holdings and trade credit are important decision-making objects in the company's business operation.Exploring the relationship between regional financial development,trade credit and company's cash holdings can improve the company's decision-making efficiency of cash holdings and trade credit.It can also provide ideas for local governments to promote the development of regional financial industries.The relationship between the two complements each other.On the one hand,the level of cash holdings will affect the level of providing or accepting trade credit.On the other hand,the company will reduce or increase the level of cash holdings because of providing or accepting trade credit.Regional financial development can have a further impact on the relationship between the two.This paper studies through panel data regression analysis.The results of the empirical analysis show that: First,providing trade credit will reduce the company's cash holdings,that is,there's a substitution relationship between the two.Providing trade credit increases the efficiency of cash inflows management and the flexibility of cash management through mortgage receivables,reducing the amount of cash held for preventive and speculative motives.Second,accepting trade credit increases the company's cash holdings,that is,there's a complementary relationship between the two.Accepting trade credit increases the amount of cash held for preventive motives,that is,the company will hold a certain amount of cash in order to repay trade credit on time to avoid debt default.Higher level of regional financial development will weaken the complementary relationship between acceptance of trade credit and cash holdings.Third,the higher the level of financial development,the easier it is for companies to obtain credit funds from banks,which increases the flexibility of cash management.The company can employ cash to seize market opportunities for profit,thereby reducing cash holdings for preventive and speculative motives.Fourth,regarding the impact of the company's property rights,whether it is providing trade credit or accepting trade credit,state-owned companies have higher cash holdings than non-state-owned companies.Suggestions from the results are as follows: First,promote the development of banking industry.The development of banks can increase the convenience in obtaining loans.Second,broaden direct financing channels,improve the company's ability to obtain long-term funds,and reduce the risk of long-term investment with short-term debt.Third,optimize the credit evaluation system,improve the financial market infrastructure,and the efficiency of capital allocation.Fourth,the company should actively get bank credit,improve its ability to obtain external funds,and thereby improve the level of corporate governance.Fifth,the company should improve information disclosure and increase the convenience for external investors and banks to get information on their operating status and development prospects.