The effect of stability and concentration of upstream and downstream relationships of focal firms on two-level trade credit

Abstract

The stability and concentration of the buyer–supplier relationships are crucial factors in the realm of supply chain finance. Previous studies have focused on the impact of a single characteristic of the buyer–supplier relationships on the trade credit of focal firms. In this study, we investigated 973 A-share listed firms in China from 2012 to 2021 and adopted ordinary least squares regression to analyze the effects of stability and concentration in both upstream and downstream relationships on two-level trade credit. Our findings indicate that supplier stability has a positive impact, while concentration negatively impacts focal firms’ access to trade credit. Furthermore, customer stability and concentration positively affect the focal firms’ provided trade credit. In addition, focal firms’ market power mitigates the impact of supplier stability and concentration on focal firms receiving trade credit while amplifying the impact of customer concentration on focal firms providing trade credit. A higher supplier concentration is a disadvantage for focal firms, whereas customer stability is an advantage for focal firms to reduce the cost of trade credit. Our study offers comprehensive insights for promoting supply chain financial flows via supply chain relationship management.