We evaluated the moderating effects of firm size and leverage on the working capital finance (WCF)-profitability relationship among Chinese companies during 2000-2017. Applying the generalized method of moments (GMM) technique on panel data, we observed that firm size and leverage have strong moderating roles in the WCF-profitability relationship. We observed that small or low-leverage firms have an inverted U-shaped WCF-profitability relationship. However, this relationship is U-shaped for large or high-leverage firms. We report break-even points in these relationships that show the portion of short-term debt in working capital financing. The results reveal that the break-even point for all subgroups (small, large, low-leverage, and high-leverage firms) decreases compared to the break-even point of the full sample. This study shows how the break-even point of the WCF-profitability relationship shifts when a company expands or its leverage level changes. Managers can use this information for profit maximization.

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This study investigates the linkage between trade credit demand and corporate innovation. The estimations are robust to a series of covariates, fixed‐effect, instrumental variable modeling, and the difference‐in‐difference approach. Our findings reveal that the nexus between enterprise innovation and trade credit demand is positive and statistically significant. The said attachment is more visible in private, financially constrained, small, and high‐tech enterprises. The study also found that innovative firms relied heavily on trade‐credit financing after the financial crisis of 2008. Managers should carefully design trade‐credit agreements because operating suppliers have an important role in the enterprises' radical growth activities.

This study investigates the nexus of stock liquidity and trade-credit policies in China from 2002 to 2017. The estimates are robust to alternative proxies, various fixed-effects, and the exogenous impact of Chinese split share structure reforms (SSSR) 2005-06 is investigated through the difference-in-difference analysis. The results validate that stock liquidity significantly impacts firms’ capacity to produce more trade credit supplies and less reliant on trade credit demand. The study applied SUEST analysis to investigate the effect of the Chinese institutional setting. The nexus of stock liquidity and trade credit strategies is substantial in state-owned enterprises. Additional analysis revealed that the said association is more visible to credit-constrained and equity-reliant enterprises. The policymakers should focus on market liquidity because it elevates firms’ capacity to mobilize capital through trade credit provisions. The micro aspect of this study suggests that stock liquidity allows managers to shape non-price competitive strategies and avoid excessive usage of trade credits.

The nexus of debt financing and enterprise innovation is the most arguable debate in the modern literature of corporate finance. The subject of external debts and a smooth innovative environment is one of the common puzzles for high-tech firms. We attempt to address this puzzle and explore the impact of efficient utilization of debt on the linkage between R&D intensity and technology investment. Patent count data are used to measure enterprise innovation, therefore, negative binomial and Poisson regression is applied for empirical analysis. The estimations validate that the linkage between debt financing and corporate innovation is inverted U-shaped which approves the Kuznets curve hypothesis. Technology firms tend to decline debt undertaking after achieving a specific level, it is assumed as an optimum debt point, higher in incremental and lower in radical innovation. The mediation role of debt financing in the linkage between R&D intensity and technology investment is negative. However, efficient debt undertaking which remains under the optimum level improves the association between R&D intensity and enterprise innovation.High-tech firms should be cautious on external financing because abundant debt undertaking worsens a smooth innovative environment.