Author(s)

Jin Liu, Sunlu sun, Yannan Yin and Chenfang Chi

Corresponding Author

Jin Liu

Abstract

Trade credit, as a substitute for bank credit, can ease the financing difficulties of small and medium-sized firms to a certain extent. This paper empirically tests the effect of financial development and internal control on trade credit. Empirical results show that enterprises with high-quality internal control obtain more trade credit easily. Compared with the firms in the high level of financial development areas, in the lower-level areas, firms’ internal control quality has a significant effect on trade credit. We also found that non-state owned firms have difficulty obtaining trade credit. This article not only verified the economic consequences of internal control but also elucidated financial development and trade credit factors.

Keywords

Financing development; internal control; trade credit financing; property right