Author(s)

Fang Xiaohong

Corresponding Author

Fang Xiaohong

Abstract

This article analyses the mechanism of how the ultimate ownership structure which includes the control rights of the firm’s largest ultimate owner, the cash-flow rights, the deviation between control rights and cash-flow rights, and the type of largest ultimate owner, influences the trade credit based on theoretical deduction from the point of agency cost theory. Generally speaking, after empirical study, the results show that the stronger the control rights of the largest ultimate owner, the more the cash-flow rights of the largest ultimate owner are, or the largest-owner is the state-owned property, the more trade credit companies can access to, vice versa. On the contrary, the greater the divergence between control and cash-flow rights, the more expensive the trade credit costs, and the less trade credit may be.

Keywords

Ultimate Ownership Structure; Trade Credit; Empirical Study