Stock Exchanges Query Letters And Firms’ Trade Credit Financing

As the first-line regulator of the capital market,the stock exchange has been committed to constructing and optimizing the regulatory methods in line with China’s national conditions.As an important supplement to the traditional punitive supervision measures,the inquiry supervision system is a concrete embodiment of the idea of “transforming government functions and innovating supervision methods” emphasized in the report of the 19 th National Congress of the Communist Party of China.It plays an important role in improving the quality of information disclosure and protecting the legitimate rights of information users.Therefore,the effectiveness of inquiry letter regulation has been the focus of scholars at home and abroad.Based on the realistic background of deepening the reform of the regulatory system in China,this paper takes the inquiry letters published by the Shanghai and Shenzhen stock exchanges from 2015 to 2020 as the research object,and examines whether the query letters system,one of the main non-penalty regulation measures formulated by stock exchanges as the first-line regulatory agency,will affect the trade credit financing of firms receiving the query letter.The results show that suppliers and customers who come from the upstream and downstream of supply chain can receive various risk signals about the receiving firms transmitted by the query letters,and then adjust the credit policy for this firm.In other words,query letters supervision will significantly reduce the receiving firms’ commercial credit financing level,which is reflected in the fact that the higher the frequency and depth inquired by stock exchange,the lower the level of trade credit financing of the receiving companies.In addition,the high market position,the good regional credit environment and legal environment can alleviate negative effect of the query letters supervision on the receiving firms’ trade credit financing effectively.Further research shows that the higher the frequency and depth inquired by stock exchange,the greater the probability of financial risks and debt defaults in the future for companies.From the perspective of post-verification,this conclusion confirms that the risk early warning of the query letter is reliable and accurate.Therefore,suppliers and customers should take the query letter into consideration when formulating trade credit policy,so as to ensure financial security.The incremental contributions of this paper are as follows:(1)this paper expands the research on the economic consequences of the inquiry letter regulatory system.Although some studies have discussed the inhibitory effect of inquiry letters on trade credit financing,this paper also examines the regulating effect of inquiry letters on trade credit financing from the perspectives of market position(individual characteristics of enterprises),regional credit environment(informal system)and regional legal environment(formal system),and further proves whether the risk warning effect of the inquiry letter is accurate and reliable from the perspective of post-verification.In addition,considering the large transaction amount and high transaction frequency between suppliers,customers and enterprises,the research object of this paper is expanded to all inquiry letters.(2)This paper enriches the research on the influencing factors of trade credit financing.Different from the perspective of financial information regularly disclosed by enterprises,this paper studies whether suppliers and customers can effectively receive the information of inquiry letters and respond to it in time from the perspective of non-financial information,thus broadening the existing research perspective.The conclusion of this paper provides enlightenment for strengthening the “first-line supervision” function of the stock exchange and standardizing the economic behavior of enterprises.It not only improves the attention of the participants of the capital market to the inquiry letters,but also contributes to the fair,healthy,stable and orderly development of the capital market.