Common institutional ownership and corporate trade credit

Abstract

Using a dataset of Chinese listed firms from 2010 to 2022, this study demonstrates that common institutional ownership significantly facilitates the use of trade credit. The mechanism analysis reveals that common institutional ownership strengthens firms' market positions and mitigates information asymmetry. The effect is more pronounced in non-state-owned enterprises and in regions with lower levels of marketization. Additionally, corporate governance structures, such as the presence of a single controlling shareholder and CEO duality, significantly amplify the impact of common institutional ownership on trade credit. These findings contribute to the literature on trade credit determinants by shedding light on the broader implications of common institutional ownership for corporate stakeholders and governance dynamics.