The Effect of State Ownership on Trade Credit Supply in A Developing Country

This study examines the relationship between state ownership and trade credit supply in Vietnam, a developing market. Using a dataset of 675 non-financial firms from 2013 to 2022, the study finds that state ownership tends to increase trade credit supply, highlighting the validity of resource-based theory and stakeholder theory. Furthermore, the results indicate that this effect is more pronounced for firms with higher cash holdings and profitability, or favorable internal financial conditions. Additionally, while stronger governance mechanisms generally reduce trade credit supply, state ownership appears to override this effect, underscoring the complex interaction between governance, ownership structure, and financial decision-making. To address endogeneity concerns, we employ several techniques, including instrumental variable regression, the introduction of lagged independent variable, the Heckman correction for sample selection bias and System Generalized Method of Moments. The results are robust to these specifications. The findings bring several important implications for business management and policymakers.