Firms' access to informal financing: The role of shared managers in trade credit access |
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| Institution: | 1. School of Management, Huazhong University of Science and Technology, China;2. Jiangxi University of Finance and Economic, China;3. School of Management, Zhejiang University, China;4. Business School, Xi''an Jiaotong-Liverpool University, China;1. Tilburg University, Netherlands;2. Nova School of Business and Economics, Portugal;1. Sabanc? University, Sabanc? Business School, Turkey;2. University of Maryland, Robert H. Smith School of Business, United States of America;3. Koc University, College of Administrative Sciences and Economics, Turkey |
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| Abstract: | We investigate how shared managers and directors (shared M&Ds) with major suppliers affect a firm's access to trade credit. Using a sample of listed firms in China, we find that shared M&Ds play an important role in helping firms obtain trade credit. This favorable effect is strengthened for firms with higher information asymmetry, located in regions with lower social trust, operating in more innovative and heterogeneous industries, and experiencing greater financial constraints. Our findings support the proposition that shared M&Ds can reduce information asymmetry and build mutual trust between firms and their suppliers. This study contributes to the literature on the benefits of social connections within supply chain relationships and the literature on the economic consequences of interlocked managers and directors. |
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