Summary:
As of the end of 2017, the operating mileage of China’s high-speed railway exceeded 25,000 kilometers, accounting for 66.3% of the world’s total high-speed rail. From a global perspective, investment in transportation infrastructure is extremely expensive. In 2016 alone, China spent around RMB11.89 trillion on infrastructure. However, we still have limited academic and practical understanding of the real effects of transportation infrastructure. Given the increasing economic and social effects of high-speed rail, it is of great theoretical and practical significance to explore the impact of the extension of China’s high-speed rail network. Although, intuitively, the rapid development of transportation infrastructure can be seen to directly affect supplier-customer relationships, few studies have focused on this area. This paper focuses on a general economic characteristic of supplier-customer relationships, namely the extension of trade credit. Using the exogenous impact of the rapid development of China’s high-speed rail network, we examine the causal effects of transportation infrastructure on supplier-customer relationships. The development of high-speed rail can reduce a company’s transportation costs, and thereby increase the transaction volume between the company and its customers. The increased transaction volume not only reduces the degree of information asymmetry between the company and its customers (from a signal transmission perspective), but also facilitates long-term cooperation between them and improves the product quality (from a moral hazard perspective). These factors reduce the company’s motivation to provide trade credit for product quality guarantees. Using data on the time high-speed rail is introduced in the areas in which listed companies are located, we use a difference-in-differences approach to examine the causal relationship between the introduction of high-speed rail and a company’s decision to extend trade credit. The results of this paper show that the introduction of high-speed rail has a significant negative impact on companies’ decisions to extend trade credit. Specifically, after high-speed rail is introduced, companies reduce their extension of trade credit by 3.51%. Moreover, the increase in trading volume is shown to be an important channel through which high-speed rail can reduce companies’ extension of trade credit. Further support is found for stronger treatment effects among firms with ex ante greater information asymmetry, more relationship-specific investments, and lower requirements for product quality guarantees. We also conduct a series of robustness tests to further validate the causal effects of the baseline results. The results show that our basic research findings are robust and reliable. This paper makes the following contributions to the literature. First, this paper contributes to the research on the motives for extending trade credit by incorporating the exogenous changes in China’s transportation infrastructure in the analysis of a company’s decision to extend trade credit, and using the impact of high-speed rail to integrate the two research perspectives of the product quality guarantee theory of trade credit. Moreover, this paper examines the heterogeneity of the treatment effects and provides further support for the product quality guarantee theory of the extension of trade credit. Second, this paper contributes to the research on the effects of transportation infrastructure on the decision-making and behavior of micro-economic entities, and provides empirical evidence for the micro-pathway through which transportation infrastructure promotes economic growth. To a certain extent, our findings shine light on the black box of the macro-economic effects of traffic infrastructure. Third, this paper uses the expansion of China’s high-speed rail network as a quasi-natural experiment to alleviate endogeneity problems. The use of a quasi-natural experiment based on exogenous changes helps to alleviate the adverse effects of important omitted variables on the causal inferences. In this paper, the extension of China’s high-speed rail network serves as a quasi-natural experiment to identify the causal effect of transportation infrastructure on companies’ decisions to extend trade credit. This paper provides timely feedback on the impact of high-speed rail, and provides supplementary empirical evidence on the micro-pathways and intermediate mechanisms through which the construction of infrastructure promotes economic growth. Overall, the findings of this paper enhance our understanding of the economic effects of transportation infrastructure and the factors that influence companies’ decisions on the supply of trade credit.
陈胜蓝, 刘晓玲. 中国城际高铁与商业信用供给——基于准自然实验的研究[J]. 金融研究, 2019, 472(10): 117-134.
CHEN Shenglan, LIU Xiaoling. China’s High-Speed Intercity Railway and the Extension of Trade Credit: Evidence from a Quasi-natural Experiment. Journal of Financial Research, 2019, 472(10): 117-134.
Agrawal, A., Galasso, A., and Oettl, A. 2017. “Roads and Innovation”, Review of Economics and Statistics, 99(3): 417~34.
[9]
Antras, P., and Foley, C. F. 2015. “Poultry in Motion: A Study of International Trade Finance Practices”, Journal of Political Economy, 123(4): 853~901.
[10]
Aschauer, D. A. 1989. “Is Public Expenditure Productive”,Journal of Monetary Economics, 23(2): 177~200.
[11]
Ayers, B., Ramalingegowda, S., and Yeung, E. 2011. “Hometown Advantage: The Effects of Monitoring Institution Location on Financial Reporting Discretion”, Journal of Accounting and Economics, 52: 41~61.
[12]
Babich, V., and Tang, C. S. 2012. “Managing Opportunistic Supplier Product Adulteration: Deferred Payments, Inspection, and Combined Mechanisms”, Manufacturing and Service Operations Management, 14(2): 301~314.
[13]
Banerjee, S., Dasgupta, S., and Kim, Y. 2008. “Buyer-Supplier Relationships and the Stakeholder Theory of Capital Structure”,The Journal of Finance, 63(5): 2507~2552.
[14]
Bertrand, M., and Mullainathan, S. 2003. “Enjoying the Quiet Life? Corporate Governance and Managerial Preferences”, Journal of Political Economy, 111(5): 1043~1075.
[15]
Bougheas, S., Demetriades, P. O., and Morgenroth, E. L. W. 1999. “Infrastructure, Transport Costs and Trade”, Journal of International Economics, 47(1): 169~189.
[16]
Breza, E., and Liberman, A. 2017. “Financial Contracting and Organizational Form: Evidence from the Regulation of Trade Credit”,The Journal of Finance, 72(1): 291~324.
[17]
Chod, J., Lyandres, E.,and Yang, S. A. 2019. “Trade Credit and Supplier Competition”, Journal of Financial Economics, 131(2): 484~505.
[18]
Costello, A. M. 2013. “Mitigating Incentive Conflicts in Inter-Firm Relationships: Evidence from Long-Term Supply Contracts”, Journal of Accounting and Economics, 56(1): 19~39.
[19]
Davis, A. M., and Hyndman, K. 2017. “An Experimental Investigation of Managing Quality through Monetary and Relational Incentives”, Management Science, 64(5): 2345~2365.
[20]
Dehejia, R. H., and Wahba, S. 2002. “Propensity Score-Matching Methods for Nonexperimental Causal Studies”, Review of Economics and Statistics, 84(1): 151~161.
[21]
Duranton, G., Peter, M.M., and Matthew, A. T. 2014. “Roads and Trade: Evidence from the US”, Review of Economic Studies, 81(2): 681~724.
[22]
Fauver, L., Hung, M., Li, X., and Taboada, A. G. 2017. “Board Reforms and Firm Value: Worldwide Evidence”,Journal of Financial Economics, 125(1): 120~142.
[23]
Fernald, J. G. 1999. “Roads to Prosperity? Assessing the Link between Public Capital and Productivity”, American Economic Review, 89(3): 619~638.
[24]
Gopalan, R., Mukherjee A., and Singh, M. 2016. “Do Debt Contract Enforcement Costs Affect Financing and Asset Structure”,Review of Financial Studies, 29(10): 2774~2813.
[25]
Holloway, S. S., and Parmigiani, A. 2016. “Friends and Profits Don’t Mix: The Performance Implications of Repeated Partnerships”, Academy of Management Journal, 59(2): 460~478.
[26]
Irvine, P. J., Park, S. S., and Yldzhan, . 2015. “Customer-Base Concentration, Profitability, and the Relationship Life Cycle”, The Accounting Review, 91(3): 883~906.
[27]
Kalwani, M. U., and Narayandas, N. 1995. “Long-Term Manufacturer-Supplier Relationships: Do They Pay Off for Supplier Firms”,The Journal of Marketing, 1~16.
[28]
Lee, Y.W., and Stowe, J. D. 1993. “Product Risk, Asymmetric Information, and Trade Credit”, Journal of Financial and Quantitative Analysis, 28(2): 285~300.
[29]
Long, M. S., Malitz, I. B., and Ravid, S. A. 1993. “Trade Credit, Quality Guarantees, and Product Marketability”, Financial Management, 117~127.
[30]
Love, I., Preve, L. A., and Sarria-Allende, V. 2007. “Trade Credit and Bank Credit: Evidence from Recent Financial Crises”, Journal of Financial Economics, 83(2): 453~469.
[31]
Shirley, C., and Winston, C. 2004. “Firm Inventory Behavior and the Returns from Highway Infrastructure Investments”, Journal of Urban Economics, 55(2): 398~415.
[32]
Singh, M. 2018. “Enemy at the Gates: Trade Credit v/s Price Discount as a Strategic Tool”, Working Paper.
[33]
Smith, J. K. 1987. “Trade Credit and Informational Asymmetry”, Journal of Finance, 42(4): 863~872.
