Changqin Luo , Hanwen Sun , Guochao Yang , Bohui Zhang
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Law and borders: Entrepreneurs' immigration status and trade credit
We examine whether the immigration status of entrepreneurs is a concern for creditors when extending trade credit. Utilizing the disclosure of overseas residence rights of controlling shareholders in China, we show that overseas residence rights negatively affect firms' ability to obtain trade credit. This negative association is attenuated if the overseas jurisdiction has an extradition treaty with China. Our results are robust to the introduction of the Hong Kong national security law as a source of exogenous variation in the boundary of domestic law. The decrease in trade credit provision is more pronounced in firms that are perceived as less trustworthy (i.e., with less social trust or higher expropriation risk). Our results offer new insights into how the reach of law across borders can affect firms' financing activities.
期刊介绍:
The Journal of Corporate Finance aims to publish high quality, original manuscripts that analyze issues related to corporate finance. Contributions can be of a theoretical, empirical, or clinical nature. Topical areas of interest include, but are not limited to: financial structure, payout policies, corporate restructuring, financial contracts, corporate governance arrangements, the economics of organizations, the influence of legal structures, and international financial management. Papers that apply asset pricing and microstructure analysis to corporate finance issues are also welcome.