Government Guidance Funds and Trade Credit Financing: Evidence from Chinese A-Share Listed Firms

This study study whether and how equity participation by Chinese government guidance funds (GGFs) changes the trade credit that firms obtain from their business counterparties. Using 25,149 firm-year observations of nonfinancial Shanghai and Shenzhen A-share companies between 2012 and 2023, this study find that, after controlling for firm characteristics and industry and year fixed effects, GGF-backed firms carry 2.72 percentage points more trade credit as a share of total assets, equivalent to 13.5% of the sample mean. The estimate holds under alternative exposure and trade-credit measures and firm fixed effects, and it survives a series of sample adjustments, propensity-score matching, a Heckman correction, and an instrumental-variable specification. GGF backing is further associated with lower discretionary accruals, more analyst attention, and a higher corporate reputation score, consistent with improved information and trust between the firm and its suppliers. Cross-sectional tests locate the effect mainly among smaller firms and among firms facing fewer financing constraints, lower distress risk, and stronger market positions, indicating that suppliers weigh both public certification and commercial capacity. By identifying supplier finance as a relevant spillover of government-sponsored equity, the paper extends research on public capital and traces a governance–attention–reputation route from equity participation to working-capital access.