IDEAS home Printed from https://ideas.repec.org/a/eee/finana/v96y2024ipas1057521924005295.html
   My bibliography  Save this article

Do technology export regulations impact corporate trade credit financing? Evidence from China

Author

Listed:
  • Li, Haoyang
  • Wang, Xue
  • Liu, Chenyang
  • Han, Lin

Abstract

Based on an exogenous shock—the 2008 revision of the Catalog of Technologies Prohibited and Restricted from Export in China—we use a difference-in-differences (DID) research design to examine the impact of technology export restrictions (TERs) on corporate trade credit financing. We document that TERs limit a firm's access to trade credit. Specifically, TERs reduce corporate trade credit by approximately 44 % compared with that of an average firm in the sample. Moreover, the negative impact is more pronounced for firms with high financial risk or high product risk. Additionally, our tests show that both upstream and downstream firms reduce their provision of trade credit to firms impacted by TERs. The results suggest that TERs add trade barriers between countries, resulting in restricted corporate trade credit financing.

Suggested Citation

  • Li, Haoyang & Wang, Xue & Liu, Chenyang & Han, Lin, 2024. "Do technology export regulations impact corporate trade credit financing? Evidence from China," International Review of Financial Analysis, Elsevier, vol. 96(PA).
    • Handle: RePEc:eee:finana:v:96:y:2024:i:pa:s1057521924005295
    DOI: 10.1016/j.irfa.2024.103597
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1057521924005295
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.irfa.2024.103597?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Joel Peress, 2010. "Product Market Competition, Insider Trading, and Stock Market Efficiency," Journal of Finance, American Finance Association, vol. 65(1), pages 1-43, February.
    2. Jiawen Yang & Hossein Askari & John Forrer & Hildy Teegen, 2004. "US Economic Sanctions Against China: Who Gets Hurt?," The World Economy, Wiley Blackwell, vol. 27(7), pages 1047-1081, July.
    3. Choi, Yoonho & Choi, E. Kwan, 2021. "Selling high-tech inputs to the enemy," International Journal of Production Economics, Elsevier, vol. 234(C).
    4. Aw, Bee-Yan & Batra, Geeta, 1998. "Firm size and the pattern of diversification," International Journal of Industrial Organization, Elsevier, vol. 16(3), pages 313-331, May.
    5. Gilbert, John & Wahl, Thomas, 2001. "Export restrictions, urban unemployment, and the location of processing activities," Economics Letters, Elsevier, vol. 71(1), pages 105-110, April.
    6. Eliana La Ferrara & Alberto Chong & Suzanne Duryea, 2012. "Soap Operas and Fertility: Evidence from Brazil," American Economic Journal: Applied Economics, American Economic Association, vol. 4(4), pages 1-31, October.
    7. Xiao Li & Jeffrey Ng & Walid Saffar, 2021. "Financial Reporting and Trade Credit: Evidence from Mandatory IFRS Adoption," Contemporary Accounting Research, John Wiley & Sons, vol. 38(1), pages 96-128, March.
    8. Thorsten Beck & Ross Levine & Alexey Levkov, 2010. "Big Bad Banks? The Winners and Losers from Bank Deregulation in the United States," Journal of Finance, American Finance Association, vol. 65(5), pages 1637-1667, October.
    9. Li, Haoyang & Yang, Mingjing & Sun, Yanqi & Chen, Jingwei, 2022. "The impact of relaxing technology export regulations on corporate innovation," Finance Research Letters, Elsevier, vol. 50(C).
    10. Smith Stegen, Karen, 2015. "Heavy rare earths, permanent magnets, and renewable energies: An imminent crisis," Energy Policy, Elsevier, vol. 79(C), pages 1-8.
    11. Lee, Sangwoo & Park, Kwangwoo & Shin, Hyun-Han, 2009. "Disappearing internal capital markets: Evidence from diversified business groups in Korea," Journal of Banking & Finance, Elsevier, vol. 33(2), pages 326-334, February.
    12. Ding, Sai & Guariglia, Alessandra & Knight, John, 2013. "Investment and financing constraints in China: Does working capital management make a difference?," Journal of Banking & Finance, Elsevier, vol. 37(5), pages 1490-1507.
    13. Catherine Yap Co, 2012. "US Trade in Advanced Technology Products," Review of Development Economics, Wiley Blackwell, vol. 16(1), pages 16-30, February.
    14. Edward I. Altman, 1968. "Financial Ratios, Discriminant Analysis And The Prediction Of Corporate Bankruptcy," Journal of Finance, American Finance Association, vol. 23(4), pages 589-609, September.
    15. Susan Athey & Guido W. Imbens, 2006. "Identification and Inference in Nonlinear Difference-in-Differences Models," Econometrica, Econometric Society, vol. 74(2), pages 431-497, March.
    16. Maria del Carmen Garcia-Alonso & Keith Hartley, 2000. "Export controls, market structure and international coordination," Defence and Peace Economics, Taylor & Francis Journals, vol. 11(3), pages 481-503.
    17. Zi Wang & Yanling Zhou, 2021. "Who starts the trade war? A theory of export controls and quid pro quo," The World Economy, Wiley Blackwell, vol. 44(10), pages 2950-2965, October.
    18. Edward I. Altman, 1968. "The Prediction Of Corporate Bankruptcy: A Discriminant Analysis," Journal of Finance, American Finance Association, vol. 23(1), pages 193-194, March.
    19. Ruiqi, Wang & Wang, Fangjun & Xu, Luying & Yuan, Changhong, 2017. "R&D expenditures, ultimate ownership and future performance: Evidence from China," Journal of Business Research, Elsevier, vol. 71(C), pages 47-54.
    20. Vivek Astvansh & Niket Jindal, 2022. "Differential Effects of Received Trade Credit and Provided Trade Credit on Firm Value," Production and Operations Management, Production and Operations Management Society, vol. 31(2), pages 781-798, February.
    21. Kale, Jayant R. & Loon, Yee Cheng, 2011. "Product market power and stock market liquidity," Journal of Financial Markets, Elsevier, vol. 14(2), pages 376-410, May.
    22. Hartley, Tilman & Kallis, Giorgos, 2021. "Interest-bearing loans and unpayable debts in slow-growing economies: Insights from ten historical cases," Ecological Economics, Elsevier, vol. 188(C).
    23. Hosoe, Nobuhiro, 2021. "Impact of tighter controls on Japanese chemical exports to Korea," Economic Modelling, Elsevier, vol. 94(C), pages 631-648.
    24. Stanley D Nollen, 1987. "Business Costs and Business Policy for Export Controls," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 18(1), pages 1-18, March.
    25. Glenn W. Boyle & Graeme A. Guthrie, 2003. "Investment, Uncertainty, and Liquidity," Journal of Finance, American Finance Association, vol. 58(5), pages 2143-2166, October.
    26. Xia, Changyuan & Zhang, Xiaowei & Cao, Chunfang & Xu, Nan, 2019. "Independent director connectedness in China: An examination of the trade credit financing hypothesis," International Review of Economics & Finance, Elsevier, vol. 63(C), pages 209-225.
    27. Garcia-Alonso, Maria del Carmen, 2003. "National-security export-quality restrictions in segmented and non-segmented markets," European Journal of Political Economy, Elsevier, vol. 19(2), pages 377-390, June.
    28. Wruck, Karen Hopper, 1990. "Financial distress, reorganization, and organizational efficiency," Journal of Financial Economics, Elsevier, vol. 27(2), pages 419-444, October.
    29. Jian, Jianhui & Li, Huaqian & Meng, Leah & Zhao, Chunxiang, 2020. "Do policy burdens induce excessive managerial perks? Evidence from China’s stated-owned enterprises," Economic Modelling, Elsevier, vol. 90(C), pages 54-65.
    30. Fu, Ke & Wang, Ce & Xu, Jiayan, 2022. "The impact of trade credit on information sharing in a supply chain," Omega, Elsevier, vol. 110(C).
    31. Baker, Andrew C. & Larcker, David F. & Wang, Charles C.Y., 2022. "How much should we trust staggered difference-in-differences estimates?," Journal of Financial Economics, Elsevier, vol. 144(2), pages 370-395.
    32. Cindy Whang, 2019. "Undermining the Consensus-Building and List-Based Standards in Export Controls: What the US Export Controls Act Means to the Global Export Control Regime," Journal of International Economic Law, Oxford University Press, vol. 22(4), pages 579-599.
    33. X. Lecocq & B. Demil, 2006. "Strategizing industry structure: the case of open systems in a low-tech industry," Post-Print hal-00185305, HAL.
    34. Gan, Liu & Xia, Xin & Zhang, Hai, 2022. "Debt structure and debt overhang," Journal of Corporate Finance, Elsevier, vol. 74(C).
    35. Yoonho Choi & E. Kwan Choi, 2021. "Selling High-Tech Inputs to the Enemy," CESifo Working Paper Series 8886, CESifo.
    36. Fabbri, Daniela & Klapper, Leora F., 2016. "Bargaining power and trade credit," Journal of Corporate Finance, Elsevier, vol. 41(C), pages 66-80.
    37. Katrien Kestens & Philippe Van Cauwenberge & Heidi Vander Bauwhede, 2012. "Trade credit and company performance during the 2008 financial crisis," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 52(4), pages 1125-1151, December.
    38. Lee, James & Maher, Richard, 2022. "US economic statecraft and great power competition," Business and Politics, Cambridge University Press, vol. 24(4), pages 332-347, December.
    39. Hongkang Xu & Duong Nguyen & Mai Dao, 2021. "Pilot CEOs and trade credit," The European Journal of Finance, Taylor & Francis Journals, vol. 27(6), pages 486-509, April.
    40. Petersen, Mitchell A & Rajan, Raghuram G, 1994. "The Benefits of Lending Relationships: Evidence from Small Business Data," Journal of Finance, American Finance Association, vol. 49(1), pages 3-37, March.
    41. Jonathan Munemo, 2022. "The effect of regulation‐driven trade barriers and governance quality on export entrepreneurship," Regulation & Governance, John Wiley & Sons, vol. 16(4), pages 1119-1140, October.
    42. Seiler, Volker, 2021. "China-to-FOB price transmission in the rare earth elements market and the end of Chinese export restrictions," Energy Economics, Elsevier, vol. 102(C).
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Montserrat Manzaneque-Lizano & Esteban Alfaro-Cortés & Alba María Priego de la Cruz, 2019. "Stakeholders and Long-Term Sustainability of SMEs. Who Really Matters in Crisis Contexts, and When," Sustainability, MDPI, vol. 11(23), pages 1-27, November.
    2. Xu, Si & He, Xiaoyi & Cao, Chunfang, 2023. "Struggle for survival in credit crunch: The effect of interest rate deregulation in China," China Economic Review, Elsevier, vol. 77(C).
    3. Hasan, Mostafa Monzur & Habib, Ahsan, 2019. "Social capital and trade credit," International Review of Financial Analysis, Elsevier, vol. 61(C), pages 158-174.
    4. Li, Haoyang & Yang, Mingjing & Sun, Yanqi & Chen, Jingwei, 2022. "The impact of relaxing technology export regulations on corporate innovation," Finance Research Letters, Elsevier, vol. 50(C).
    5. Chen, Yangyang & Li, Qingyuan & Ng, Jeffrey & Wang, Chong, 2021. "Corporate financing of investment opportunities in a world of institutional cross-ownership," Journal of Corporate Finance, Elsevier, vol. 69(C).
    6. Li, Tongxia & Lu, Chun & Wang, Hui, 2023. "Stakeholder orientation and trade credit: Evidence from a natural experiment," International Review of Economics & Finance, Elsevier, vol. 87(C), pages 15-34.
    7. Lawrenz, Jochen & Oberndorfer, Julia, 2018. "Firm size effects in trade credit supply and demand," Journal of Banking & Finance, Elsevier, vol. 93(C), pages 1-20.
    8. Jhang, Shih-Sian (Sherwin) & Ogden, Joseph P. & Suresh, Nallan C., 2019. "Operational and financial configurations contingent on market power status," Omega, Elsevier, vol. 88(C), pages 91-109.
    9. Gropp, R. & Grundl, C. & Guttler, A., 2012. "Does Discretion in Lending Increase Bank Risk? Borrower Self-Selection and Loan Officer Capture Effects," Other publications TiSEM bfec5360-2a2b-47e4-ba3f-d, Tilburg University, School of Economics and Management.
    10. Simon Cornée, 2014. "Soft Information and Default Prediction in Cooperative and Social Banks," Journal of Entrepreneurial and Organizational Diversity, European Research Institute on Cooperative and Social Enterprises, vol. 3(1), pages 89-103, June.
    11. Zhou, Fanyin & Fu, Lijun & Li, Zhiyong & Xu, Jiawei, 2022. "The recurrence of financial distress: A survival analysis," International Journal of Forecasting, Elsevier, vol. 38(3), pages 1100-1115.
    12. Yanyi Ye & Yun Wang & Xiaoguang Yang, 2022. "Bank loan information and information asymmetry in the stock market: evidence from China," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 8(1), pages 1-28, December.
    13. Nadiah Amirah Nor Azhari & Suhaily Hasnan & Zuraidah Mohd Sanusi, 2020. "The Relationships Between Managerial Overconfidence, Audit Committee, CEO Duality and Audit Quality and Accounting Misstatements," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 11(3), pages 18-30, June.
    14. Fabio Panetta & Fabiano Schivardi & Matthew Shum, 2009. "Do Mergers Improve Information? Evidence from the Loan Market," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 41(4), pages 673-709, June.
    15. Gyimah, Daniel & Siganos, Antonios & Veld, Chris, 2021. "Effects of financial constraints and product market competition on share repurchases," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 74(C).
    16. Rasa Kanapickiene & Renatas Spicas, 2019. "Credit Risk Assessment Model for Small and Micro-Enterprises: The Case of Lithuania," Risks, MDPI, vol. 7(2), pages 1-23, June.
    17. Hamid Waqas & Rohani Md-Rus, 2018. "Predicting financial distress: Applicability of O-score model for Pakistani firms," Business and Economic Horizons (BEH), Prague Development Center, vol. 14(2), pages 389-401, April.
    18. Massimo Omiccioli, 2005. "Trade Credit as Collateral," Temi di discussione (Economic working papers) 553, Bank of Italy, Economic Research and International Relations Area.
    19. Geoffroy Enjolras & Philippe Madiès, 2020. "The role of bank analysts and scores in the prediction of financial distress: Evidence from French farms," Economics Bulletin, AccessEcon, vol. 40(4), pages 2978-2993.
    20. Miguel García-Posada & Juan Mora-Sanguinetti, 2014. "Are there alternatives to bankruptcy? A study of small business distress in Spain," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 5(2), pages 287-332, August.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:finana:v:96:y:2024:i:pa:s1057521924005295. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/620166 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.