Law and Borders: Entrepreneurs’ Immigration Status and Trade Credit

Changqin Luo, Hanwen Sun, Guochao Yang, Bohui Zhang

Research output: Contribution to journalArticlepeer-review

Abstract

We examine whether the immigration status of entrepreneurs is a concern for creditors when extending trade credit. Utilizing the disclosure of overseas residence rights of controlling shareholders in China, we show that overseas residence rights negatively affect firms' ability to obtain trade credit. This negative association is attenuated if the overseas jurisdiction has an extradition treaty with China. Our results are robust to the introduction of the Hong Kong national security law as a source of exogenous variation in the boundary of domestic law. The decrease in trade credit provision is more pronounced in firms that are perceived as less trustworthy (i.e., with less social trust or higher expropriation risk). Our results offer new insights into how the reach of law across borders can affect firms' financing activities.
Original languageEnglish
Article number102606
JournalJournal of Corporate Finance
Volume87
Early online date6 Jun 2024
DOIs
Publication statusE-pub ahead of print - 6 Jun 2024

Data Availability Statement

Data will be made available on request.

Keywords

  • Law
  • Borders
  • Immigration
  • Trade credit
  • Trust

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