Social Trust,Trade Credit And Corporate Financial Risk

Financial risk is an important issue for by business operations.Especially in the period of deepening reform,the business are facing more severe challenges.Financial risk has become a key factor affecting enterprise development.As an important business method and financing method of enterprises,trade credit plays an important role in the operation of the enterprises,and it will have an impact on the financial risk of the enterprise.Social trust,as an important part of the informal system,will also have an important impact on the behavior and business decisions of enterprises.Based on this,this paper is committed to exploring the relationship between trade credit and corporate financial risk,and considering the impact of social trust on the relationship between the two,with a view to providing useful inspiration for corporate production and operation decisions,financial risk prevention,and business environment construction.Through combing the relevant literature,it is found that the existing research mainly focuses on the linear relationship between trade credit and corporate financial risk.This paper takes this as a starting point,proposes and confirms that there is a significant non-linear relationship between trade credit and corporate financial risk in the Chinese context.Specifically,by selecting A-share listed companies from 2004 to 2018 as samples,this paper finds that there is A significant non-linear relationship between trade credit supply and trade credit use and corporate financial risk.Trade credit financing can help alleviate the financing constraints faced by enterprises,thereby reducing corporate financial risk;however,excessive trade credit financing will cause a sharp increase in debt pressure,leading to an increase in corporate financial risks.Trade credit supply can help companies improve their operating performance,which helps reduce corporate financial risk;However,excessive supply of trade credit will lead to the lack of liquidity of suppliers,the rise of financial risk,and even lead to the contagion of liquidity risk in the supply chain.These findings are important supplement to the research in the field of trade credit,and at the same time help to improve the understanding of the relationship between trade credit and corporate financial risk.Subsequently,scholars have confirmed that social trust can affect corporate trade credit policies and business decisions by reducing information asymmetry and supervising corporate behavior.This paper uses the number of NGOs per 10,000 people in each province and the survey results of the "Chinese Entrepreneur Survey System" as the social trust measurement indicators to further explore the moderating effect of social trust on the non-linear relationship between trade credit and corporate financial risk.The results show that social trust has a significant positive moderating effect on the non-linear relationship between trade credit and corporate financial risk.Finally,this paper carried out a series of tests to ensure the robustness of the conclusions.Firstly,we change the measurement method for key variables such as trade credit,social trust and corporate financial risk to control for the influence of measurement error.Secondly,in view of possible endogenous problems such as sample bias and reverse causality,the Heckman two-stage method and 2SLS are used for further testing.The above analysis results show that the conclusions of this paper have strong robustness.Based on the above research results,this paper puts forward the following recommendations: First,local governments should pay attention to the role of informal systems,build core values through education,and promote the construction of good social trust environment.At the same time,promote local bank-enterprise cooperation,reduce information asymmetry between the two parties,and ease corporate financing constraints.Second,Companies should strengthen information disclosure and strengthen the connection with financial institutions and upstream and downstream enterprises.To formulate a reasonable commercial credit policy based on the status quo of business operations and other factors,financial risk control should also be emphasized.