The Impact Of Trade Credit On Firm Value

Now,many China companies are looking for ways to succeed beyond their competitors in the context of a rapidly changing economic environment and market demand.Companies are developing their competitive advantages,internalizing external resources and integrating supply chain relationships to become their competitive know-how.Trade credit,as a means of payment between supply chain enterprises,is an important tool for enterprises to promote sales,reduce costs and mitigate risks.Making full use of this tool will help enterprises improve their core competitiveness and have a good supply chain partnership,which in turn will have a profound impact on maintaining the stability of China’s industrial chain supply chain.Therefore,this paper examines the impact of trade credit on firm value from the perspective of supply chain relationships.This paper applies the competitive market hypothesis and cooperative synergy theory,and regresses the data of Shanghai and Shenzhen A-share listed companies from 2014-2021 using a two-way fixed effects model.Based on supply chain relationship perspective,this paper investigate the direction and influence mechanism of trade credit on firm value,explore whether supplier concentration and customer concentration play a moderating role between trade credit and firm value,and further explore how the impact of trade credit on firm value differs among firms with different nature of ownership,market position,and level of financing constraints.The results of the study show that:(1)Trade credit is significantly and positively related to firm value.(2)Trade credit contributes to firm value through the competitiveness indicator of firm profits.Trade credit adds more free cash flow for firms to invest in profitable opportunities and strengthen firms’ competitive strength,which provides empirical support for the competitive market hypothesis.(3)Supplier concentration and customer concentration work in synergy to play a positive moderating role,further contributing to the positive impact of trade credit on firm value.(4)SOEs,high market position enterprises and low financing constraint enterprises are subject to more financing channels and strong credit support from financial institutions,and their use of trade credit does not have a significant effect on the enhancement of firm value.Most of the existing studies focus on the impact of trade credit on firm value from the perspective of "upstream supplier-enterprise" binary relationship,ignoring the "enterprise-downstream customer" binary relationship.And on this basis,this paper makes the following contributions: First,based on the perspective of triadic relationship of supply chain,it explores the impact of trade credit on firm value,which enriches the research on the relationship between trade credit and firm value.Second,based on the competitive market hypothesis,this paper expands the transmission mechanism of trade credit affecting firm value,reconceptualizes trade credit as positively affecting firm value through corporate profits.Third,using supplier concentration and customer concentration indicators,this paper finds that both play a facilitating role in the impact of trade credit on firm value,jointly moderating the impact of trade credit on firm value.This paper helps enterprises pay attention to the use of trade credit and strengthen supply chain relationship management and has certain reference significance for our government to strictly punish enterprises’ breach of trust and improve the construction of credit system.