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Trade credit financing, social trust, and financial distress : Evidence from Chinese listed companies

Tang, Ying ; Wang, Biliang ; Moro, Andrea LU ; Chen, Jinyu and Sheehan, Maura (2025) In Research in International Business and Finance 79.
Abstract

This research investigates the relationship between trade credit financing and firms’ financial distress using a sample of Chinese listed companies from 2000 to 2020. Our results reveal a significant U-shaped relationship between firms’ trade credit financing and the likelihood of financial distress and that social trust moderates this curvilinear relationship. Our evidence suggests that firm liquidity and financial constraints are two underlying channels through which trade credit financing produces this U-shaped impact on firm bankruptcy risk. Our results are robust to alternative measures of key variables and tests for endogeneity (reverse causality and omitted variables).

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author
; ; ; and
organization
publishing date
type
Contribution to journal
publication status
published
subject
keywords
Financial distress, Social trust, Trade credit, U-shaped relationship
in
Research in International Business and Finance
volume
79
article number
103053
publisher
Elsevier
external identifiers
  • scopus:105010625399
ISSN
0275-5319
DOI
10.1016/j.ribaf.2025.103053
language
English
LU publication?
yes
additional info
Publisher Copyright: © 2025 Elsevier B.V.
id
5bfd7544-0fcb-43f1-b0d3-b4a0256efbb2
date added to LUP
2025-12-15 15:28:09
date last changed
2025-12-15 15:28:33
@article{5bfd7544-0fcb-43f1-b0d3-b4a0256efbb2,
  abstract     = {{<p>This research investigates the relationship between trade credit financing and firms’ financial distress using a sample of Chinese listed companies from 2000 to 2020. Our results reveal a significant U-shaped relationship between firms’ trade credit financing and the likelihood of financial distress and that social trust moderates this curvilinear relationship. Our evidence suggests that firm liquidity and financial constraints are two underlying channels through which trade credit financing produces this U-shaped impact on firm bankruptcy risk. Our results are robust to alternative measures of key variables and tests for endogeneity (reverse causality and omitted variables).</p>}},
  author       = {{Tang, Ying and Wang, Biliang and Moro, Andrea and Chen, Jinyu and Sheehan, Maura}},
  issn         = {{0275-5319}},
  keywords     = {{Financial distress; Social trust; Trade credit; U-shaped relationship}},
  language     = {{eng}},
  publisher    = {{Elsevier}},
  series       = {{Research in International Business and Finance}},
  title        = {{Trade credit financing, social trust, and financial distress : Evidence from Chinese listed companies}},
  url          = {{http://dx.doi.org/10.1016/j.ribaf.2025.103053}},
  doi          = {{10.1016/j.ribaf.2025.103053}},
  volume       = {{79}},
  year         = {{2025}},
}