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Dig the treasure nearby: The impact of local supplier preference on trade credit financing

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  • Duan, Zhixin
  • Hu, Mingsheng

Abstract

This study focuses on the location characteristics of the supply chain, and investigates the impact of whether or not firms have local suppliers on their trade credit financing and the moderating effect of institutional factors. By exploiting the manually identified data of suppliers of Chinese listed firms, we find that the preference of local suppliers promotes the acquisition of trade credit financing. Moreover, the effects are more pronounced among firms in regions with a lower degree of marketization. Further analysis shows that low information asymmetry and high trust between local suppliers and firms are plausible mechanisms. We also examine the economic consequences of trade credit; firms with local suppliers have considerable access to trade credit, thereby contributing to firm performance and bank credit.

Suggested Citation

  • Duan, Zhixin & Hu, Mingsheng, 2024. "Dig the treasure nearby: The impact of local supplier preference on trade credit financing," International Review of Economics & Finance, Elsevier, vol. 89(PA), pages 629-650.
    • Handle: RePEc:eee:reveco:v:89:y:2024:i:pa:p:629-650
    DOI: 10.1016/j.iref.2023.07.057
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    More about this item

    Keywords

    Local suppliers; Trade credit financing; Marketization; Consequence;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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