Abstract

Legal environment, and trade credit

Author(s): Yan Yanyang, Liu Pengfei, Yan Huiru

Taking the Chinese listed companies which transacted in ShenZhen SME board from 2004 to 2010 as the object of this dissertation, we explore the relation between legal environment and enterprise trade credit. We find that the law level of area which enterprises belong to influence enterprise trade credit in both direct and indirect ways. More specifically, the direct positive effect is greater impact than the indirect negative effect, so there is a significant positive relationship between law and trade credit. Further studies show that when compared with private enterprises, the law level puts lower impact on the state-owned enterprises in trade credit. In conclusion, higher law level provides higher trade credit, which is the key to enterprise growth.