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The effect of the COVID-19 pandemic on corporate trade credit financing

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  • Xie, Wenlan
  • Tian, Haowen

Abstract

Using a difference-in-differences (DiD) model, this study investigates the causal relationship between the COVID-19 pandemic and trade credit financing. We find that the pandemic significantly increases trade credit financing for companies that are strongly affected by COVID-19. This may because of the increasing cost of bank lending; companies turn to more flexible and less costly alternatives as a result. A parallel trend test supports this finding. This research provides implications for corporate managers, supply chain partners, and capital market investors.

Suggested Citation

  • Xie, Wenlan & Tian, Haowen, 2023. "The effect of the COVID-19 pandemic on corporate trade credit financing," Economics Letters, Elsevier, vol. 232(C).
    • Handle: RePEc:eee:ecolet:v:232:y:2023:i:c:s0165176523003646
    DOI: 10.1016/j.econlet.2023.111339
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    References listed on IDEAS

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    Cited by:

    1. Tian, Haowen & Wang, Junkai, 2024. "Navigating the storm: How the COVID-19 pandemic transformed the M&A landscape," Finance Research Letters, Elsevier, vol. 59(C).

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