Abstract
Using a difference-in-differences (DiD) model, this study investigates the causal relationship between the COVID-19 pandemic and trade credit financing. We find that the pandemic significantly increases trade credit financing for companies that are strongly affected by COVID-19. This may because of the increasing cost of bank lending; companies turn to more flexible and less costly alternatives as a result. A parallel trend test supports this finding. This research provides implications for corporate managers, supply chain partners, and capital market investors.
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