Do companies’ green credentials enhance trade credit provisions? Global evidence

We investigate the impact of corporate renewable energy (RE) adoption on suppliers’ trade credit provisions. Using a global sample of 30 countries, we establish that firms with higher RE consumption secure increased trade credit. Our results remain robust to a variety of sensitivity tests and after accounting for potential endogeneity concerns using the Paris Agreement and companies switching to green energy as exogenous shocks. Our channel analysis reveals that RE take-up mitigates companies’ environmental risk (proxied by environmental violation fines, media coverage of environmental controversies, GHG emissions, and environmental policy stringency). Additional tests reveal that the association between RE and trade credit is stronger for adopters with lower bargaining power and those in environmentally sensitive industries. Finally, we find that RE adopters also extend more trade credit to their own customers, indicating a supply-chain spillover effect. Our paper provides original evidence that adapting RE improve companies' access to informal financing in the form of higher trade credit.