Trade Credit And Stock Price Crash

In recent years,the stock price crash has occurred frequently,Most of the stock price crash due to China's listed companies hide bad news.Compared with the ordinary investors in the capital market,the upstream suppliers of the company have more ways and means to acquire the bad news of the company.Through normal business contacts with the company,suppliers can more easily obtain information related to the company's daily business activities,major investment decisions,and financial status.Therefore,it is difficult for a company to hide its bad news from suppliers.Suppliers have the information advantage to supervise the company's behavior and can restrain the company's behavior by pressing to collect accounts receivable more quickly or terminate business cooperation.Supplier supervision reduces the risk of a sharp fall in share prices.In addition,companies that rely more on trade credit financing may have diffcu;lt raising capital.Therefore,these companies will choose to disclose more information to obtain more external financing.The reduction of information asymmetry will reduce the possibility of stock price collapse.From the perspective of corporate financing,this paper discusses whether there is a significant negative correlation between corporate credit and stock price crash risk.This paper selected the data of Chinese A-share main board-listed companies from 2009 to2017,and selected the main variables for regression by referring to existing document.The research finds that :(1)other things being equal,the trade credit of a company has a negative effect on the crash risk in the future.That is,the higher the proportion of Trade credit the enterprise obtains,the lower the risk of the company's stock price crash in the future.(2)the continuous supervision of suppliers and the improvement of the quality of the company's financial reports reduce the risk of the company's stock price crash in the future.(3)extend the prediction period of stock price crash risk to the third year.Tradecredit still has an impact on stock price crash risk,but its persuasiveness is weakened.(4)investors can avoid the risk of stock price crash to some extent by using the information related to accounts payable in financial statements.This paper shows that the supervision of suppliers caused by Trade credit can reduce the risk of stock price crash.In order to obtain more external financing instead of relying mainly on Trade credit,the company will further improve the quality of financial reports disclosed,thus reducing the possibility of stock price crash.