Trade Credit in Transition Economies: Does State Ownership Matter?

Post-Communist Economies, Forthcoming

Posted: 5 Aug 2019 Last revised: 18 Jan 2021

See all articles by Sabri Boubaker

Sabri Boubaker

Ecole de Management de Normandie

Kim Cuong Ly

Swansea University

Nam Tran

University of Economics Ho Chi Minh City

Date Written: September 30, 2018

Abstract

We investigate the influence of residual state ownership on firm behaviors in providing and receiving trade credit by using a Vietnamese government’s privatization experiment. Our robust results show that a substantial withdrawal of state capital from listed state-owned enterprises (SOEs) does not disturb these firms’ supply of and demand for trade credit, affirming the state sector’s disinclination for trade credit redistribution in the context that trade credit may be not a source of soft budget constraints and local privatization programs have not been motivated by efficiency. The finding is featured as a transitional phenomenon in a state-dominated economy that is inadequately supportive of private sector development and a poor legal system encouraging informal contract enforcement. Vietnamese firms with more accounting conservatism, probably in response to their creditors’ increasing demand for earnings quality, are found to provide less trade credit, implying trade credit-reducing effect of accounting conservatism. We suggest that improvements in financial report audit and corporate governance quality during Vietnam’s recent privatization programs increase the effectiveness of the capital market.

Keywords: trade credit, state ownership, accounting conservatism, privatization experiment, transition economies

JEL Classification: G32, G34, M41, P34

Suggested Citation

Boubaker, Sabri and Ly, Kim Cuong and Tran, Nam, Trade Credit in Transition Economies: Does State Ownership Matter? (September 30, 2018). Post-Communist Economies, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3257866

Sabri Boubaker

Ecole de Management de Normandie ( email )

9 rue Claude Bloch
Le Havre Cedex, Cedex 4 14052 Caen
France

HOME PAGE: http://https://www.em-normandie.com/en/sabri-boubaker

Kim Cuong Ly

Swansea University ( email )

Room 229, Swansea Bay Campus
Fabian Way
Swansea, Wales SA1 8EN
United Kingdom

Nam Tran (Contact Author)

University of Economics Ho Chi Minh City ( email )

279 Nguyen Tri Phuong Street, Ward 5, District 10
Ho Chi Minh City, 700000
Vietnam

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