IDEAS home Printed from https://ideas.repec.org/p/hal/journl/hal-04670162.html
   My bibliography  Save this paper

Law, Politics, and Trade Credit in China

Author

Listed:
  • Senlin Miao

    (NUAA - Nanjing University of Aeronautics and Astronautics [Nanjing])

  • Zhaobo Zhu

    (Audencia Business School)

  • Xiaohua Deng

    (University of New South Wales [Kensington])

  • Fenghua Wen

    (Central South University [Changsha])

Abstract

This paper explores the interplay between politics and law enforcement in China and its effects on firm financing decisions. By examining a sample of corporate lawsuits involving listed firms in China, we find that politically connected firms are less likely to be defendants, have higher win rates, and experience shorter litigation durations than non-connected firms. Additionally, we observe that firms with higher legal risk extend more accounts receivable and receive less accounts payable, but this relationship holds only for non-connected firms. Our findings support the financing advantage theory for politically connected firms and the legal risk compensation view for non-connected firms. Moreover, reforms in China's judicial system do not appear to mitigate the disadvantages faced by non-connected firms in terms of lawsuit outcomes and trade credit provision. Our findings suggest that well-functioned judicial independence might be still lacking in China, and that political connections continue to negatively impact law enforcement and corporate policies.

Suggested Citation

  • Senlin Miao & Zhaobo Zhu & Xiaohua Deng & Fenghua Wen, 2024. "Law, Politics, and Trade Credit in China," Post-Print hal-04670162, HAL.
  • Handle: RePEc:hal:journl:hal-04670162
    DOI: 10.1016/j.jcorpfin.2024.102643
    Note: View the original document on HAL open archive server: https://hal.science/hal-04670162
    as

    Download full text from publisher

    File URL: https://hal.science/hal-04670162/document
    Download Restriction: no

    File URL: https://libkey.io/10.1016/j.jcorpfin.2024.102643?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
    ---><---

    More about this item

    Keywords

    Lawsuits; Judicial reforms; Political connections; Trade credit;
    All these keywords.

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    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:hal:journl:hal-04670162. 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.

    We have no bibliographic references for this item. You can help adding them by using 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: CCSD (email available below). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    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.