Digital transformation and trade credit provision: Evidence from China

Trade credit is essential for enterprises in business activities. Given the current wave of digitalization, it is important to explore how digital transformation affects trade credit provision. Based on data on Chinese A-share listed enterprises from 2012 to 2019, we empirically examine the relationship between digital transformation and trade credit provision. We find that digital transformation significantly increases trade credit provision. The mechanism of the relationship is an increase in short-term bank credit. We further examine the heterogeneity of firms’ supply capacity and willingness, and find that the relationship is more significant among non-state-owned enterprises, enterprises with greater financing constraints and fierce market competition, and enterprises located in provinces that have low social trust than among other types. This paper extends the study of the economic consequences of firms’ digital transformation and the influencing factors of trade credit provision. [Display omitted] •Digital transformation significantly enhances the provision of trade credit.•The mechanism is the increase in short-term bank credit.•Effect is more pronounced for firms with fierce market competition.•Effect is more pronounced for firms with greater financing constraints•Effect is more pronounced for non-SOEs and firms with low regional social trust.