Financial Leakage,Bank Discrimination and Trade Credits
CAI Ji-fu(Accounting School,Jiangxi University of Finance and Economics,Nanchang 330013,China)
Based on the fundamental principle of trade credit redistribution,using observations of the Chinese listed companies of Shanghai and Shenzhen stock markets in 2003-2010,this paper empirically studies on the relationship between bank loan and trade credit from the perspective of financial leakage and bank discrimination.The results show that bank loans of state-owned controlling companies are significantly positively associated with their accounts receivable,suggesting that bank formal loans available to state-owned controlling companies are not converted into outputs completely,some of which are informally transfferred to other enterprises through the channel of trade credit.What's more,this financial leakage effect is even more significant in less profitable state-owned controlling companies.On the contrary,bank loans of private-owned controlling companies are significantly negatively associated with their accounts payable,which means that credit discriminations in formal financial markets,as well as the failure of law protection to private property rights during the economic transition in China,force private-owned controlling companies to use more trade credits based on implicit contractual relationship in order to ameliorate financial constraints facing in formal financial markets.Though trade credits can play an important role in promoting growth of private-owned controlling companies,an effective formal financial system is critical for a country's economy long-term development.
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