Corporate misconduct, trade credit and charitable donations: evidence from Chinese listed companies

摘要

Purpose The purpose of this paper is to investigate how revelations of corporate misconduct are associated with trade credit. Specifically, it investigates how this association varies in different regions, in different types of industries and in response to companies' subsequent charitable donations. Design/methodology/approach The authors empirically tested various hypotheses using a sample of 2,725 Chinese A-share listed companies from 2009 to 2014 based on signaling theory. Fixed effect models underpinned the methods used. Findings The authors found that corporate misconduct has a significant negative impact on an irresponsible company's trade credit received and granted, and the negative impact is heterogeneous for different regions and industries. There is no evidence that charitable donations mitigate the effect on the trade credit of irresponsible companies following revelations of corporate misconduct. Originality/value This study enriches understanding on the consequences of corporate misconduct and extends the literature on trade credit. It fills a research gap by identifying the impact of corporate misconduct on trade credit.