Stock Liquidity and Corporate Trade Credit Strategies: Evidence From China

Abstract

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.

Does the stock liquidity drive the trade credit of publicly listed firms in Saudi Arabia?

“…Nonetheless, the impact of stock liquidity on trade credit is still growing body of knowledge, particularly, in the emerging markets. Most recent studies in this field are Abdulla et al (2017), Shang (2020), Islam et al (2022) and Shahzad et al (2022). The focus of these studies either is mainly China markets or cross countries studies that draw general insights from various countries.…”

“…Recently, Shahzad et al (2022) examined the stock liquidity and firms' trade strategy in China and reported the firms' stock liquidity lead to more extension of credit to customers and less likely to depend on suppliers for the demand of trade credit. More comprehensively using emerging market cross-countries study, Islam et al (2022) found that firms use less credit when their assets are liquid.…”

“…where LIQ it is the Amihud liquidity ratio for stock i in year t, and D is the total number of trading days during firm i's fiscal year t, jR it j is the absolute return on day t for firm i, and VOL it is the trading volume (in units of currency) on day t. We follow the approach of other studies (i.e Edmans et al, 2013;Shang, 2020;Nguyen, 2020;Shahzad et al, 2022) in the modification of the measures by taking the natural logarithm of (one plus) each measure and multiply it by -1 so that a high value corresponds to high liquidity. Thus, the resulting value can predict the liquidity of the firms.…”

Liquidez y estrategias de cobranza en una Institución Educativa Privada, en contexto de Pandemia por COVID-19

“…Por su parte, Shahzad et al (2022) concluyeron que los formuladores de políticas deben centrarse en la liquidez del mercado porque eleva la capacidad de las empresas para movilizar capital a través de disposiciones de crédito comercial; el aspecto micro de este estudio sugiere que la liquidez de las acciones permite a los gerentes diseñar estrategias competitivas sin precios y evitar el uso excesivo de créditos comerciales. En Reino Unido, Vanteeva & Hickson (2021) concluyeron que las empresas se beneficiaron con los préstamos gubernamentales a largo plazo, particularmente después de las crisis financieras y de los términos de intercambio.…”

A Hybrid Approach of Wavelet Transform, Convolutional Neural Networks and Gated Recurrent Units for Stock Liquidity Forecasting

“…Stock liquidity affects financial stability [7], [8]. It also impacts the financial structure and cost of capital [9], [10], the dividend distribution policy [11], and the risk of corporate failures [12], [13].…”