Currently, China boasts the largest number of listed companies globally. Trade credit suppliers leverage insights into the future outlook of these entities, extending trade credit as a strategy to capitalize on profitable ventures. This study demonstrates that this informational advantage contributes substantially to the predictability of assessing investment returns. Focusing on A-share listed companies, those relying more on trade credit than on debt financing exhibit heightened potential for future sales growth and stock returns. The predictability of return associated with trade credit is particularly pronounced in firms characterized by a greater degree of information asymmetry. Consequently, this paper aims to investigate the factors influencing the utilization of trade credit and the correlation between its use and the future prospects of listed companies relying on this financial mechanism.
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g et al. (2024) studied this question.
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