Inventory investment and the choice of financing: does financial development play a role?

Yang, J., Guariglia, A., Peng, Y. and Shi, Y. (2022) Inventory investment and the choice of financing: does financial development play a role? Journal of Corporate Finance, 74, 102139. (doi: 10.1016/j.jcorpfin.2021.102139)

Abstract

This paper uses a panel of 224,604 Chinese firms over the period 2004–2009 linked with a set of unique city-level financial development data to examine how financial development affects the way corporate inventory investment is financed. We find that financial development enhances the use of interest-bearing loans and discourages the use of trade credit in financing inventory investment. These effects are more pronounced after the 2007 property rights reform, as well as for privately-owned firms, small firms, firms with no political connections, and firms located in coastal regions. Our results are robust to using a variety of different specifications, as well as different measures of financial development and estimation methods.

• Item Type: Articles
• Status: Published
• Refereed: Yes
• Glasgow Author(s) Enlighten ID: Shi, Dr Yukun and Guariglia, Professor Alessandra
• Authors: Yang, J., Guariglia, A., Peng, Y., and Shi, Y.
• College/School: College of Social Sciences > Adam Smith Business School; College of Social Sciences > Adam Smith Business School > Accounting and Finance
• Journal Name: Journal of Corporate Finance
• Publisher: Elsevier
• ISSN: 0929-1199
• ISSN (Online): 1872-6313
• Published Online: 08 February 2022
• Copyright Holders: Copyright © 2021 Published by Elsevier B.V.
• First Published: First published in Journal of Corporate Finance 74: 102139
• Publisher Policy: Reproduced in accordance with the publisher copyright policy