ABSTRACT Using the staggered adoption of the Inevitable Disclosure Doctrine (IDD) across U.S. states, this study examines whether legal protection of trade secrets granted to a firm's rivals affects the firm's trade credit when it is not similarly protected. Employing a difference‐in‐differences design, we find that unprotected firms reduce trade credit after their rivals gain protection. This effect is driven by lower capital demand and weakened bargaining power in the supply chain and is less pronounced for mature firms and those with stronger credit ratings. Results are robust across multiple tests.
Shi et al. (Fri,) studied this question.
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