The Impact Of Trade Credit On Corporate Performance Under Economic Fluctuations

Trade credit is an important auxiliary measure to complete transactions in supply chains,and it is also an important source of short-term financing for companies.Under the new phenomenon of China's economy,we should pay more attention to the change and influence of trade credit.This paper uses panel data for Chinese listed companies from 2002 to 2016 to study the impact of Tobin's Q and bargaining power on trade credit under different economic conditions,and we ultimately study how trade credit affects companies' performance during economic fluctuations.We find that companies with higher Tobin's Q values tend to reduce the use of trade credit demand,which increases during the economic expansion period and weakens during the economic downturn.Second,companies with lower bargaining power tend to increase their use of trade credit expansion as a competitive tool;however,this effect will weaken during the economic expansion period and will increase during the economic downturn.We also find that the amounts of trade credit demand and expansion are negatively correlated with corporate performance and that this effect weakens during the economic expansion period and increases during the economic downturn.The cycle of trade credit expansion is positively related to corporate performance.This relationship weakens during the economic expansion and strengthens during the economic downturn.More importantly,we find that enterprises should adopt different trade credit strategies under different trade credit levels,and such differences will change with the different economic environment.Based on the perspective of trade credit,this paper provides practical ways and methods to improve enterprise performance.The innovation of this paper is mainly in the following aspects:(1)it studies the demand of trade credit as well as the expansion of trade credit,and characterizes two aspects of trade credit with four indicators.(2)From the perspective of financing,Tobin's Q is added to the influencing factors of trade credit.(3)The changes of trade credit in the economic fluctuation is studied.(4)The impact of trade credit on corporate performance and the changes in economic fluctuation are analyzed.