Internal Capital Market And Commercial Credit Behavior

An effectively functioning internal capital market makes up for the shortcomings of the external capital market and plays a supportive role in the survival and development of enterprise groups.With the accelerated pace of corporate diversification and conglomeration,internal capital markets have gradually become a hot topic of academic research.Most of the existing studies on the economic consequences of internal capital markets focus on the impact on the enterprise group itself,but ignore the possible external spillover effects of this behavior.With the supply chain gradually replacing vertical integration,the competition among individual enterprises has gradually evolved into the competition between supply chain and supply chain,and how to survive and develop in the fierce competition has become an important strategic issue for enterprises.In this context,do enterprises with internal capital markets have the incentive to use their own resource allocation advantages to provide commercial credit to upstream and downstream enterprises in the supply chain?Based on a supply chain collaboration perspective,this paper explores the impact of the operation of firms’ internal capital markets on their commercial credit behavior and further explores the collaboration effects among supply chain firms using manually collated data from 2008-2019 for enterprise groups.It is found that the more active the internal capital market is,the larger the scale of commercial credit supply provided by firms to upstream and downstream enterprises in the supply chain.Moreover,the increase in supply chain concentration strengthens the willingness of enterprise groups to manage supply chain relationships,which in turn motivates upstream and downstream supply chain enterprises to reduce their credit appropriation to core enterprises and thus take advantage of synergies,and this finding still holds under a series of robustness tests.The heterogeneity study finds that the collaboration effect between upstream and downstream firms in the supply chain is more pronounced among private firms,firms with high asset specialization,and firms with low management myopia.The mechanism study suggests that the operation of the internal capital market of a conglomerate can promote more commercial credit support by alleviating its own financing constraints.Further,this paper finds that conglomerates with internal capital markets still have a need for commercial credit financing,but with significantly shorter commercial credit repayment cycles.The marginal contributions of this paper are: first,it extends the research scope of the economic consequences of the internal capital market of the group from the enterprise itself to the supply chain.While most existing studies separate the internal and external capital allocation mechanisms of enterprises,there are complex connections between enterprises in the process of internal and external capital allocation,this paper explores the internal resource allocation of enterprises from the perspective of supply chain collaboration and expands the research boundary of internal capital market.Second,the mechanism of business credit generation is revealed from the dual perspective of supply and demand.This paper examines the mechanism of the operation of internal capital market on business credit behavior from the dual perspectives of supply and demand in the supply chain environment,which makes our understanding and knowledge of the business credit behavior of enterprises more comprehensive and concrete.Finally,it provides useful policy insights for maintaining the security and stability of the supply chain and contributing to the high-quality development of the real economy.This paper finds that the collaborative effect exists among supply chain enterprises,which reflects the willingness to "co-manage" supply chain relationships and provides a logical reference to correct the distortion of commercial credit and optimize the allocation of financial resources.