In person interaction to build trust: Evidence from supply chain financing

Breaking through trust barriers is the key for Chinese enterprises to overcome financing constraints. This paper explores how managers seeking more direct interactions with outsiders during investor conferences affect a firm’s access to trade credit. The results demonstrate a positive relationship between manager-investor interactions and the provision of trade credit. This effect is more pronounced in companies with a low-intensive social trust region, higher buyer-supplier ESG alignment, and offline meetings, but disappears in companies with involuntary CEO dismissals. The trust-motivating efficacy derived from conference interactions is further mirrored by the fact that the shock-hit enterprises’ trust effect persists even after experiencing natural disasters and financial misstatements. This association is robust to several checks, including analogous alternative explanations and a two-stage instrumental regression utilizing the car-driving distance and the travel time between the headquarter of a firm visited and the headquarter of institutional visitors.