Financial Development,Trade Credit And Redistributive Effect

Trade credit is the payment extension companies give to their customers when selling products to them. The redistribution theory of trade credit states that less-constrained companies can be expected to redistribute part of their obtained short-term bank credit by granting it to some more-constrained companies in order to achieve the second allocation of funds. Based on the panel data of Chinese listed firms from2003-2013,this article studies the weakening trend of redistributive effect and the buffering effect of financial development on this trend during the global crisis through the comparison between the management motivation and redistribution of trade credit.The fixed effects regression model found that Financial crisis caused decreased supply of commercial credit, its redistributive effect weakened but still be effective, which can be explained by the fact that the supply of trade credit declines abide by the bank credit contraction. Further evidence shows that in areas where financial development is relatively high,the weakening trend of redistributive effect is significantly improved,which proved that good financial development can help companies defend the negative impact of the financial crisis on the commercial credit supply. Finally, from the view of commercial credit demand,we further confirmed the fact thatfinancial development,commercial credit and the redistributioneffect are more outspoken during the financial crisis. Since China exists serious credit discrimination, through respectively regression on different types of enterprise property,we found that the decline of trade credit supply and redistribution effect of private sector is more pessimistic compared with state-owned firms under the impact of financial crisis, while the buffering effect of financial development on the weakening redistributive effect in the private sector is more significant.This paper contributes to the related researches of trade credit and redistribution from the perspective of how firms respond to the financial crisis. From the perspective of the impact of the financial crisis on enterprises, this article expands and deepens the research on business credit and redistribution theory and provides a possible explanationon how financial development can promote economic growth and the necessity of the reform of state-owned enterprise property rights.