Trade Credit Financing And Charitable Donations

In the case of widespread financing difficulties,trade credit with fewer financing restrictions and low costs is generally favored by enterprises.Trade credit is generated in daily transactions,and long-term transactions make creditors have a better understanding of business activities,high transparency of information and easier control of debtor companies.Suppliers discover the ongoing or upcoming abnormal transactions in time.They are in the same supply chain as the company and have a better understanding of the business industry in which the company is located.Therefore,changes in the company’s future credit capabilities and operating conditions can be prepared in advance.Stronger control over debtors and stronger governance effect.It can effectively restrict companies from using funds for ineffective investments.It can improve investment efficiency,reducing agency costs.Meanwhile it can increase the value of companies.Charitable donations have gradually become one of the most important ways for companies to fulfill their social responsibilities.There are many motives for enterprises to make donations,including altruistic motives to increase social welfare,and self-interest motives that believe that donations are enterprises’ over-investment or motives for gaining benefits.It also includes mixed motives that have different motives due to different time,place,and events,and passive follow-up motives that are forced to donate to the industry average under external pressure.Therefore,it is necessary to explore whether trade credit exerts its characteristics of restraining excessive investment and reducing agency costs,thereby reducing corporate donations or whether it has more free funds after the trade credit increases the value of the enterprise,and invest it in donations that can bring a good image and positive performance to the enterprise.It provides an opportunity to study the impact of trade credit on charitable donations.This article draws on the existing research on debt versus donation.It selects the data of China’s A-share listed companies from 2009 to 2019 as the research sample,and explores the impact of trade credit on charitable donations through literature research methods and empirical research methods.It also distinguishes the nature of enterprise property rights for analysis.Research results:(1)Under other conditions unchanged,trade credit has a negative impact on charitable donations.(2)Under other conditions unchanged,the negative impact of commercial credit on donation behavior is only established in state-owned enterprises,enterprises with weak market power and weak mortgage guarantee capabilities.(3)Under other conditions unchanged,trade credit has a negative impact on excess donations.(4)In the negative impact of trade credit on charitable donations,the second type of agency problem plays an intermediary role.This article puts forward corresponding suggestions for the public to rationally view donation behavior and enterprises to make reasonable financing decisions.It adds to the study of the relationship between the two.This article studies the impact of trade credit on charitable donations,and enriches the theoretical research related to charitable donations.It provides a theoretical basis for trade credit to reduce agency costs and improve enterprise investment efficiency.It proves that enterprises use donations to achieve private purposes.At the same time,it provides suggestions for enterprises to make appropriate financing and investment decisions.It is recommended to standardize donation behavior as soon as possible,and promote enterprises to make charitable donations correctly.Enterprises coordinate the needs of stakeholders,improving corporate governance as well as.Eventually it will promote the sustainable development of society.