Corporate social responsibility and trade credit during periods of monetary contraction

Figures & data

Table 1. Summary statistics.

	Mean	Min	Max	Median	S.D.
Dependent variable
$\mathit{TC}$ (%) (Trade credit received)	7.40	0.31	40.27	5.67	6.27
Core independent variables of interest
$\mathit{MP}$ (Monetary policy index)	0.0046	–0.089	0.041	0.0070	0.021
$\mathit{CSR}$ (Corporate social responsibility)	–0.19	–1.53	1.74	–0.21	0.50
Firm-level control variables
$\mathit{log}(\mathit{AT})$ (Firm size)	7.08	3.69	11.34	6.97	1.50
$(\mathit{log}(\mathit{AT}){)}^2$ (Firm size squared)	52.45	13.64	128.54	48.55	22.25
$\mathit{Tobin}{ }^{\mathrm{\prime }}\mathit{sQ}$ (%) (Tobin’s Q)	199.15	76.11	825.96	164.04	111.51
$\mathit{COGS}/\mathit{AT}$ (%) (Operation scales)	17.34	0.55	91.43	13.72	14.26
$\mathrm{\Delta }$ COGS/AT (%) (Operation scale changes)	0.26	–14.54	14.85	0.19	2.84
$\mathit{INVT}/\mathit{AT}$ (%) (Inventory stock)	10.62	0	57.31	8.21	10.79
$\mathit{RE}/\mathit{AT}$ (%) (Retained earnings)	5.01	–657.88	104.80	21.99	76.53
$\mathit{DLTT}/\mathit{AT}$ (%) (Long-term debt)	17.87	0	89.45	14.82	17.73
Industry-level liquidity needs
Inventories/sales (%)	12.51	0	60	13.22	7.70
Cash conversion cycles	81.32	0	285.51	87.43	46.53

Note: In the regressions, we normalize the measure of $\mathit{MP}$ and $\mathit{CSR}$ to zero mean and unit standard deviation. These transformations will facilitate our calculation about the economic significance of the estimated effects.

Figure 1. Correlations between monetary policy index and trade credit for firm groups with different CSR levels.

Note: This figure shows the relationship between monetary policy index and the mean value of the trade credit to total assets ratio (%) for two firm groups with different CSR levels. Firm-fixed effects are excluded from the trade credit to total asset ratio and CSR. Figure 1(a) presents the relationship for firms with CSR in a given period above the median in that period. Figure 1(b) presents the relationship for firms with CSR in a given period below the median in that period.

Table 2. Main results.

		Liquidity needs
Variable	Full sample	High	Low
	(i)	(ii)	(iii)
$\mathit{M}{P}_t\ast \mathit{CS}{R}_{\mathit{i},\mathit{t}}$	0.033***	0.066***	0.0035
	(0.010)	(0.015)	(0.014)
$\mathit{M}{P}_t$	0.085***	0.14***	0.026*
	(0.010)	(0.016)	(0.013)
$\mathit{CS}{R}_{\mathit{i},\mathit{t}}$	0.078***	0.044*	0.11***
	(0.016)	(0.023)	(0.022)
$\mathit{log}(\mathit{A}{T}_{\mathit{i},\mathit{t}-1})$	0.067	0.70*	–0.60*
	(0.27)	(0.40)	(0.34)
$(\mathit{log}(\mathit{A}{T}_{\mathit{i},\mathit{t}-1}){)}^2$	–0.026**	–0.045**	–0.0033
	(0.012)	(0.018)	(0.016)
$\mathit{Tobin}{ }^{\mathrm{\prime }}\mathit{s}{Q}_{\mathit{t}-1}$	0.15***	0.22***	0.085***
	(0.018)	(0.027)	(0.024)
$\mathit{COG}{S}_{\mathit{i},\mathit{t}}/\mathit{A}{T}_{\mathit{i},\mathit{t}-1}$	3.70***	4.68***	2.93***
	(0.066)	(0.10)	(0.085)
$\mathrm{\Delta COG}{S}_{\mathit{i},\mathit{t}}/\mathit{A}{T}_{\mathit{i},\mathit{t}-1}$	–0.038**	–0.068***	–0.023
	(0.014)	(0.021)	(0.021)
$\mathit{INV}{T}_{\mathit{i},\mathit{t}-1}/\mathit{A}{T}_{\mathit{i},\mathit{t}-1}$	0.29***	–0.39***	1.23***
	(0.059)	(0.070)	(0.11)
$\mathit{R}{E}_{\mathit{i},\mathit{t}-1}/\mathit{A}{T}_{\mathit{i},\mathit{t}-1}$	–0.38***	–0.92***	–0.12***
	(0.036)	(0.062)	(0.041)
$\mathit{DLT}{T}_{\mathit{i},\mathit{t}-1}/\mathit{A}{T}_{\mathit{i},\mathit{t}-1}$	–0.095***	–0.11***	– 0.094***
	(0.022)	(0.036)	(0.029)
Firm-fixed effect	Yes	Yes	Yes
F-Statistic $({\beta }_{1,\mathit{H}}-{\beta }_{1,\mathit{L}}=0)$		9.45***
Observations	62,268	28,808	33,460
Number of firms	2,290	973	1,317
Adj-$R^2$	0.86	0.85	0.85

Note: Statistical significance: ***$\mathit{p}<0.01$; **$\mathit{p}<0.05$; *$\mathit{p}<0.1$. Heteroscedasticity robust standard errors clustered at the firm and quarter levels are reported in parentheses. This table presents the results of equation (1)(1) $\mathit{T}{C}_{\mathit{i},\mathit{t}}={\beta }_0+{\beta }_1\ast \mathit{M}{P}_t\ast \mathit{CS}{R}_{\mathit{i},\mathit{t}}+{\beta }_2\ast \mathit{M}{P}_t+{\beta }_3\ast \mathit{CS}{R}_{\mathit{i},\mathit{t}}+\mathrm{\Theta }\ast \mathbf{Fir}{\mathbf{m}}_{\mathit{i},\mathit{t}}+u_i+{\epsilon }_{\mathit{i},\mathit{t}}$(1) : $\mathit{T}{C}_{\mathit{i},\mathit{t}}={\beta }_0+{\beta }_1\ast \mathit{M}{P}_t\ast \mathit{CS}{R}_{\mathit{i},\mathit{t}}+{\beta }_2\ast \mathit{M}{P}_t+{\beta }_3\ast \mathit{CS}{R}_{\mathit{i},\mathit{t}}+\mathrm{\Theta }\ast \mathbf{Fir}{\mathbf{m}}_{\mathit{i},\mathit{t}}+u_i+{\epsilon }_{\mathit{i},\mathit{t}}$. $\mathit{T}{C}_{\mathit{i},\mathit{t}}$ denotes trade credit received of firm $\mathit{i}$ during period $\mathit{t}$. Recall that it is equal to the ratio of firm $\mathit{i}$‘s accounts payable ($\mathit{A}{P}_{\mathit{i},\mathit{t}}$) in period $\mathit{t}$ to one-period-lagged total assets ($\mathit{A}{T}_{\mathit{i},\mathit{t}-1}$). $\mathit{CS}{R}_{\mathit{i},\mathit{t}}$ denotes firm $\mathit{i}$‘s CSR in period $\mathit{t}$. $\mathit{M}{P}_t$ is the monetary policy index developed by Nakamura and Steinsson (2018). $\mathbf{Fir}{\mathbf{m}}_{\mathit{i},\mathit{t}}$ is a vector of time-varying firm variables (e.g., firm size, Tobin’s Q, and inventory stock) introduced in the previous section. We control for firm-fixed effects, $u_i$, in equation (1)(1) $\mathit{T}{C}_{\mathit{i},\mathit{t}}={\beta }_0+{\beta }_1\ast \mathit{M}{P}_t\ast \mathit{CS}{R}_{\mathit{i},\mathit{t}}+{\beta }_2\ast \mathit{M}{P}_t+{\beta }_3\ast \mathit{CS}{R}_{\mathit{i},\mathit{t}}+\mathrm{\Theta }\ast \mathbf{Fir}{\mathbf{m}}_{\mathit{i},\mathit{t}}+u_i+{\epsilon }_{\mathit{i},\mathit{t}}$(1) . ${\epsilon }_{\mathit{i},\mathit{t}}$ is the error term. Column (i) presents the results on the full sample. Columns (ii) and (iii) show the results on the high-liquidity-needs group and the low-liquidity-needs group, respectively. We use the ratio of inventories to sales to measure liquidity needs. The high group means that the ratio is above the median value, while the low group means the ratio is below the median. ${\beta }_{1,\mathit{H}}$ and ${\beta }_{1,\mathit{L}}$ are the estimators of the high group and the low group, respectively.

Table 3. Robustness check: control industry-specific time-fixed effects.

		Liquidity needs
Variable	Full sample	High	Low
	(i)	(ii)	(iii)
$\mathit{M}{P}_t\ast \mathit{CS}{R}_{\mathit{i},\mathit{t}}$	0.029***	0.050***	0.0031
	(0.011)	(0.016)	(0.014)
$\mathit{CS}{R}_{\mathit{i},\mathit{t}}$	0.065***	–0.0084	0.14***
	(0.016)	(0.023)	(0.023)
Control variables	Yes	Yes	Yes
Firm-fixed effect	Yes	Yes	Yes
Industry-specific time-fixed effect	Yes	Yes	Yes
F-Statistic $({\beta }_{1,\mathit{H}}-{\beta }_{1,\mathit{L}}=0)$		4.85***
Observations	62,268	28,808	33,460
Number of firms	2,290	973	1,317
Adj-$R^2$	0.87	0.87	0.86

Note: Statistical significance: ***$\mathit{p}<0.01$; **$\mathit{p}<0.05$; *$\mathit{p}<0.1$. Heteroscedasticity robust standard errors clustered at the firm and quarter levels are reported in parentheses. This table presents the results of equation (2)(2) $\mathit{T}{C}_{\mathit{i},\mathit{t}}={\beta }_0+{\beta }_1\ast \mathit{M}{P}_t\ast \mathit{CS}{R}_{\mathit{i},\mathit{t}}+{\beta }_2\ast \mathit{CS}{R}_{\mathit{i},\mathit{t}}+\mathrm{\Theta }\ast \mathbf{Fir}{\mathbf{m}}_{\mathit{i},\mathit{t}}+u_i+u_{\mathit{j},\mathit{t}}+{\epsilon }_{\mathit{i},\mathit{t}}$(2) : $\mathit{T}{C}_{\mathit{i},\mathit{t}}={\beta }_0+{\beta }_1\ast \mathit{M}{P}_t\ast \mathit{CS}{R}_{\mathit{i},\mathit{t}}+{\beta }_3\ast \mathit{CS}{R}_{\mathit{i},\mathit{t}}+\mathrm{\Theta }\ast \mathbf{Fir}{\mathbf{m}}_{\mathit{i},\mathit{t}}+u_i+u_{\mathit{j},\mathit{t}}+{\epsilon }_{\mathit{i},\mathit{t}}$. $\mathit{T}{C}_{\mathit{i},\mathit{t}}$ denotes trade credit received of firm $\mathit{i}$ during period $\mathit{t}$. Recall that it is equal to the ratio of firm $\mathit{i}$‘s accounts payable ($\mathit{A}{P}_{\mathit{i},\mathit{t}}$) in period $\mathit{t}$ to one-period-lagged total assets ($\mathit{A}{T}_{\mathit{i},\mathit{t}-1}$). $\mathit{CS}{R}_{\mathit{i},\mathit{t}}$ denotes firm $\mathit{i}$‘s CSR in period $\mathit{t}$. $\mathit{M}{P}_t$ is the monetary policy index developed by Nakamura and Steinsson (2018). $\mathbf{Fir}{\mathbf{m}}_{\mathit{i},\mathit{t}}$ is a vector of time-varying firm variables (e.g., firm size, Tobin’s Q, and inventory stock) introduced in the previous section. We control for firm- and industry-specific time-fixed effects, $u_i$ and $u_{\mathit{j},\mathit{t}}$, in equation (2)(2) $\mathit{T}{C}_{\mathit{i},\mathit{t}}={\beta }_0+{\beta }_1\ast \mathit{M}{P}_t\ast \mathit{CS}{R}_{\mathit{i},\mathit{t}}+{\beta }_2\ast \mathit{CS}{R}_{\mathit{i},\mathit{t}}+\mathrm{\Theta }\ast \mathbf{Fir}{\mathbf{m}}_{\mathit{i},\mathit{t}}+u_i+u_{\mathit{j},\mathit{t}}+{\epsilon }_{\mathit{i},\mathit{t}}$(2) . ${\epsilon }_{\mathit{i},\mathit{t}}$ is the error term. Column (i) presents the results on the full sample. Columns (ii) and (iii) show the results on the high-liquidity-needs group and the low-liquidity-needs group, respectively. We use the ratio of inventories to sales to measure liquidity needs. The high group means that the ratio is above the median value, while the low group means the ratio is below the median. ${\beta }_{1,\mathit{H}}$ and ${\beta }_{1,\mathit{L}}$ are the estimators of the high group and the low group, respectively.

Table 4. Robustness check: control other relevant firm characteristics.

		Liquidity needs
Variable	Full sample	High	Low
	(i)	(ii)	(iii)
$\mathit{M}{P}_t\ast \mathit{CS}{R}_{\mathit{i},\mathit{t}}$	0.028***	0.055***	0.0048
	(0.011)	(0.016)	(0.011)
$\mathit{M}{P}_t$	0.086***	0.13***	0.029**
	(0.010)	(0.016)	(0.013)
$\mathit{CS}{R}_{\mathit{i},\mathit{t}}$	0.087***	0.049**	0.14***
	(0.016)	(0.023)	(0.022)
$\mathit{M}{P}_t\ast \mathit{CGO}{V}_{\mathit{i},\mathit{t}}$	0.0068	–0.0033	0.028*
	(0.012)	(0.018)	(0.015)
$\mathit{CGO}{V}_{\mathit{i},\mathit{t}}$	0.0055	0.039**	–0.055***
	(0.014)	(0.019)	(0.018)
$\mathit{M}{P}_t\ast \mathit{Produc}{t}_{\mathit{i},\mathit{t}}$	0.031***	0.035**	0.0049
	(0.010)	(0.015)	(0.014)
$\mathit{Produc}{t}_{\mathit{i},\mathit{t}}$	–0.074***	–0.048**	–0.093***
	(0.016)	(0.024)	(0.021)
$\mathit{M}{P}_t\ast \mathit{Profi}{t}_{\mathit{i},\mathit{t}}$	0.013	0.021	–0.018
	(0.012)	(0.019)	(0.014)
$\mathit{Profi}{t}_{\mathit{i},\mathit{t}}$	–0.0055	–0.17***	–0.034
	(0.011)	(0.032)	(0.024)
$\mathit{M}{P}_t\ast \mathit{Bran}{d}_{\mathit{i},\mathit{t}}$	0.017	0.025	0.019
	(0.011)	(0.018)	(0.014)
$\mathit{Bran}{d}_{\mathit{i},\mathit{t}}$	0.10**	0.19**	0.062
	(0.046)	(0.075)	(0.053)
Control variables	Yes	Yes	Yes
Firm-fixed effect	Yes	Yes	Yes
F-Statistic $({\beta }_{1,\mathit{H}}-{\beta }_{1,\mathit{L}}=0)$		5.66**
Observations	62,268	28,808	33,460
Number of firms	2,290	973	1,317
Adj-$R^2$	0.86	0.85	0.85

Note: Statistical significance: ***$\mathit{p}<0.01$; **$\mathit{p}<0.05$; *$\mathit{p}<0.1$. Heteroscedasticity robust standard errors clustered at the firm and quarter levels are reported in parentheses. This table presents the results of equation (3): ${\epsilon }_{\mathit{i},\mathit{t}}$, where $\mathit{CGO}{V}_{\mathit{i},\mathit{t}}$, $\mathit{Produc}{t}_{\mathit{i},\mathit{t}}$, $\mathit{Profi}{t}_{\mathit{i},\mathit{t}}$, and $\mathit{Bran}{d}_{\mathit{i},\mathit{t}}$ denote the proxies for corporate governance, product quality, profitability, and brand capital, respectively. $\mathit{T}{C}_{\mathit{i},\mathit{t}}$ denotes trade credit received of firm $\mathit{i}$ during period $\mathit{t}$. Recall that it is equal to the ratio of firm $\mathit{i}$‘s accounts payable ($\mathit{A}{P}_{\mathit{i},\mathit{t}}$) in period $\mathit{t}$ to one-period-lagged total assets ($\mathit{A}{T}_{\mathit{i},\mathit{t}-1}$). $\mathit{CS}{R}_{\mathit{i},\mathit{t}}$ denotes firm $\mathit{i}$‘s CSR in period $\mathit{t}$. $\mathit{M}{P}_t$ is the monetary policy index developed by Nakamura and Steinsson (2018). $\mathbf{Fir}{\mathbf{m}}_{\mathit{i},\mathit{t}}$ is a vector of time-varying firm variables (e.g., firm size, Tobin’s Q, and inventory stock) introduced in the previous section. We control for firm-fixed effects, $u_i$, in equation (3). ${\epsilon }_{\mathit{i},\mathit{t}}$ is the error term. Column (i) presents the results on the full sample. Columns (ii) and (iii) show the results on the high-liquidity-needs group and the low-liquidity-needs group, respectively. We use the ratio of inventories to sales to measure liquidity needs. The high group means that the ratio is above the median value, while the low group means the ratio is below the median. ${\beta }_{1,\mathit{H}}$ and ${\beta }_{1,\mathit{L}}$ are the estimators of the high group and the low group, respectively.

Table 5. Robustness check: use instrumental variable estimation.

		Liquidity needs
Variable	Full sample	High	Low
	(i)	(ii)	(iii)
$\mathit{M}{P}_t\ast \mathit{CS}{R}_{\mathit{i},\mathit{t}}$	0.062**	0.15***	0.0056
	(0.027)	(0.050)	(0.032)
$\mathit{M}{P}_t$	0.082***	0.13***	0.025*
	(0.010)	(0.016)	(0.013)
$\mathit{CS}{R}_{\mathit{i},\mathit{t}}$	–0.049	–0.11	0.069
	(0.055)	(0.084)	(0.070)
Control variables	Yes	Yes	Yes
Firm-fixed effect	Yes	Yes	Yes
F-Statistic $({\beta }_{1,\mathit{H}}-{\beta }_{1,\mathit{L}}=0)$		6.20**
Observations	62,268	28,808	33,460
Number of firms	2,290	973	1,317
F-Statistic 1	964.96	337.60	629.77
F-Statistic 2	508.06	262.65	257.68
Hansen J-Statistic p-value	0.68	0.52	0.30

Note: Statistical significance: ***$\mathit{p}<0.01$; **$\mathit{p}<0.05$; *$\mathit{p}<0.1$. Heteroscedasticity robust standard errors clustered at the firm and quarter levels are reported in parentheses. This table presents the instrumental variable estimation results of equation (1)(1) $\mathit{T}{C}_{\mathit{i},\mathit{t}}={\beta }_0+{\beta }_1\ast \mathit{M}{P}_t\ast \mathit{CS}{R}_{\mathit{i},\mathit{t}}+{\beta }_2\ast \mathit{M}{P}_t+{\beta }_3\ast \mathit{CS}{R}_{\mathit{i},\mathit{t}}+\mathrm{\Theta }\ast \mathbf{Fir}{\mathbf{m}}_{\mathit{i},\mathit{t}}+u_i+{\epsilon }_{\mathit{i},\mathit{t}}$(1) : $\mathit{T}{C}_{\mathit{i},\mathit{t}}={\beta }_0+{\beta }_1\ast \mathit{M}{P}_t\ast \mathit{CS}{R}_{\mathit{i},\mathit{t}}+{\beta }_2\ast \mathit{M}{P}_t+{\beta }_3\ast \mathit{CS}{R}_{\mathit{i},\mathit{t}}+\mathrm{\Theta }\ast \mathbf{Fir}{\mathbf{m}}_{\mathit{i},\mathit{t}}+u_i+{\epsilon }_{\mathit{i},\mathit{t}}$. $\mathit{T}{C}_{\mathit{i},\mathit{t}}$ denotes trade credit received of firm $\mathit{i}$ during period $\mathit{t}$. Recall that it is equal to the ratio of firm $\mathit{i}$‘s accounts payable ($\mathit{A}{P}_{\mathit{i},\mathit{t}}$) in period $\mathit{t}$ to one-period-lagged total assets ($\mathit{A}{T}_{\mathit{i},\mathit{t}-1}$). $\mathit{CS}{R}_{\mathit{i},\mathit{t}}$ denotes firm $\mathit{i}$‘s CSR in period $\mathit{t}$. $\mathit{M}{P}_t$ is the monetary policy index developed by Nakamura and Steinsson (2018). $\mathbf{Fir}{\mathbf{m}}_{\mathit{i},\mathit{t}}$ is a vector of time-varying firm variables (e.g., firm size, Tobin’s Q, and inventory stock) introduced in the previous section. We control for firm-fixed effects, $u_i$, in equation (1)(1) $\mathit{T}{C}_{\mathit{i},\mathit{t}}={\beta }_0+{\beta }_1\ast \mathit{M}{P}_t\ast \mathit{CS}{R}_{\mathit{i},\mathit{t}}+{\beta }_2\ast \mathit{M}{P}_t+{\beta }_3\ast \mathit{CS}{R}_{\mathit{i},\mathit{t}}+\mathrm{\Theta }\ast \mathbf{Fir}{\mathbf{m}}_{\mathit{i},\mathit{t}}+u_i+{\epsilon }_{\mathit{i},\mathit{t}}$(1) . ${\epsilon }_{\mathit{i},\mathit{t}}$ is the error term. Column (i) presents the results on the full sample. Columns (ii) and (iii) show the results on the high-liquidity-needs group and the low-liquidity-needs group, respectively. We use the ratio of inventories to sales to measure liquidity needs. The high group means that the ratio is above the median value, while the low group means the ratio is below the median. ${\beta }_{1,\mathit{H}}$ and ${\beta }_{1,\mathit{L}}$ are the estimators of the high group and the low group, respectively.

Table 6. Extended analysis: regional social trust.

		Liquidity needs
Variable	Full sample	High	Low
	(i)	(ii)	(iii)
$\mathit{M}{P}_t\ast \mathit{CS}{R}_{\mathit{i},\mathit{t}}\ast \mathit{Trus}{t}_r$	0.057***	0.080***	0.024
	(0.015)	(0.022)	(0.020)
$\mathit{M}{P}_t\ast \mathit{CS}{R}_{\mathit{i},\mathit{t}}\ast (1-\mathit{Trus}{t}_r)$	0.0081	0.041**	–0.013
	(0.014)	(0.020)	(0.020)
$\mathit{M}{P}_t\ast \mathit{Trus}{t}_r$	0.11***	0.17***	0.031
	(0.015)	(0.022)	(0.021)
$\mathit{M}{P}_t\ast (1-\mathit{Trus}{t}_r)$	0.060***	0.10***	0.020
	(0.014)	(0.022)	(0.017)
Control variables	Yes	Yes	Yes
Firm-fixed effect	Yes	Yes	Yes
F-Statistic $({\beta }_1-{\beta }_2=0)$		5.42**
F-Statistic $({\beta }_{1,\mathit{H}}-{\beta }_{1,\mathit{L}}=0)$		3.59*
Observations	62,268	28,808	33,460
Number of firms	2,290	973	1,317
Adj-$R^2$	0.86	0.85	0.85

Note: Statistical significance: ***$\mathit{p}<0.01$; **$\mathit{p}<0.05$; *$\mathit{p}<0.1$. Heteroscedasticity robust standard errors clustered at the firm and quarter levels are reported in parentheses. This table presents the results of equation (4)(4) $\begin{array}{cc}\mathit{\hspace{0.17em}}& \mathit{T}{C}_{\mathit{i},\mathit{t}}={\beta }_0+{\beta }_1\ast \mathit{M}{P}_t\ast \mathit{CS}{R}_{\mathit{i},\mathit{t}}\ast \mathit{Trus}{t}_r+{\beta }_2\ast \mathit{M}{P}_t\ast \mathit{CS}{R}_{\mathit{i},\mathit{t}}\ast \left(1-\mathit{Trus}{t}_r\right)\\ \mathit{\hspace{0.17em}}& \mathit{\hspace{0.17em}}+{\beta }_3\ast \mathit{M}{P}_t\ast \mathit{Trus}{t}_r+{\beta }_4\ast \mathit{M}{P}_t\ast \left(1-\mathit{Trus}{t}_r\right)+{\beta }_5\ast \mathit{CS}{R}_{\mathit{i},\mathit{t}}\ast \mathit{Trus}{t}_r\\ \mathit{\hspace{0.17em}}& \mathit{\hspace{0.17em}}+{\beta }_6\ast \mathit{CS}{R}_{\mathit{i},\mathit{t}}\ast \left(1-\mathit{Trus}{t}_r\right)+\mathrm{\Theta }\ast \mathbf{Fir}{\mathbf{m}}_{\mathit{i},\mathit{t}}+u_i+{\epsilon }_{\mathit{i},\mathit{t}}\end{array}$(4) : $\mathit{T}{C}_{\mathit{i},\mathit{t}}={\beta }_0+{\beta }_1\ast \mathit{M}{P}_t\ast \mathit{CS}{R}_{\mathit{i},\mathit{t}}\ast \mathit{Trus}{t}_r+{\beta }_2\ast \mathit{M}{P}_t\ast \mathit{CS}{R}_{\mathit{i},\mathit{t}}\ast (1-\mathit{Trus}{t}_r)\text{break}+{\beta }_3\ast \mathit{M}{P}_t\ast \mathit{Trus}{t}_r+{\beta }_4\ast \mathit{M}{P}_t\ast (1-\mathit{Trus}{t}_r)+{\beta }_5\ast \mathit{CS}{R}_{\mathit{i},\mathit{t}}\ast \mathit{Trus}{t}_r+{\beta }_6\ast \mathit{CS}{R}_{\mathit{i},\mathit{t}}\ast (1-\mathit{Trus}{t}_r)\text{break}+\mathrm{\Theta }\ast \mathbf{Fir}{\mathbf{m}}_{\mathit{i},\mathit{t}}+u_i+{\text{isin}}_{\mathit{i},\mathit{t}}$, where $\mathit{Trus}{t}_r$ is a dummy indicator that equals 1 if state $\mathit{r}$‘s value of social trust is above the sample median value and 0 otherwise. $\mathit{T}{C}_{\mathit{i},\mathit{t}}$ denotes trade credit received of firm $\mathit{i}$ during period $\mathit{t}$. Recall that it is equal to the ratio of firm $\mathit{i}$‘s accounts payable ($\mathit{A}{P}_{\mathit{i},\mathit{t}}$) in period $\mathit{t}$ to one-period-lagged total assets ($\mathit{A}{T}_{\mathit{i},\mathit{t}-1}$). $\mathit{CS}{R}_{\mathit{i},\mathit{t}}$ denotes firm $\mathit{i}$‘s CSR in period $\mathit{t}$. $\mathit{M}{P}_t$ is the monetary policy index developed by Nakamura and Steinsson (2018). $\mathbf{Fir}{\mathbf{m}}_{\mathit{i},\mathit{t}}$ is a vector of time-varying firm variables (e.g., firm size, Tobin’s Q, and inventory stock) introduced in the previous section. We control for firm-fixed effects, $u_i$, in equation (4)(4) $\begin{array}{cc}\mathit{\hspace{0.17em}}& \mathit{T}{C}_{\mathit{i},\mathit{t}}={\beta }_0+{\beta }_1\ast \mathit{M}{P}_t\ast \mathit{CS}{R}_{\mathit{i},\mathit{t}}\ast \mathit{Trus}{t}_r+{\beta }_2\ast \mathit{M}{P}_t\ast \mathit{CS}{R}_{\mathit{i},\mathit{t}}\ast \left(1-\mathit{Trus}{t}_r\right)\\ \mathit{\hspace{0.17em}}& \mathit{\hspace{0.17em}}+{\beta }_3\ast \mathit{M}{P}_t\ast \mathit{Trus}{t}_r+{\beta }_4\ast \mathit{M}{P}_t\ast \left(1-\mathit{Trus}{t}_r\right)+{\beta }_5\ast \mathit{CS}{R}_{\mathit{i},\mathit{t}}\ast \mathit{Trus}{t}_r\\ \mathit{\hspace{0.17em}}& \mathit{\hspace{0.17em}}+{\beta }_6\ast \mathit{CS}{R}_{\mathit{i},\mathit{t}}\ast \left(1-\mathit{Trus}{t}_r\right)+\mathrm{\Theta }\ast \mathbf{Fir}{\mathbf{m}}_{\mathit{i},\mathit{t}}+u_i+{\epsilon }_{\mathit{i},\mathit{t}}\end{array}$(4) . ${\text{isin}}_{\mathit{i},\mathit{t}}$ is the error term. Column (i) presents the results on the full sample. Columns (ii) and (iii) show the results on the high-liquidity-needs group and the low-liquidity-needs group, respectively. We use the ratio of inventories to sales to measure liquidity needs. The high group means that the ratio is above the median value, while the low group means the ratio is below the median. ${\beta }_{1,\mathit{H}}$ and ${\beta }_{1,\mathit{L}}$ are the estimators of the high group and the low group, respectively.

Table 7. Extended analysis: market competitiveness.

		Liquidity needs
Variable	Full sample	High	Low
	(i)	(ii)	(iii)
$\mathit{M}{P}_t\ast \mathit{CS}{R}_{\mathit{i},\mathit{t}}\ast \mathit{M}{C}_{\mathit{s},\mathit{t}}$	0.057***	0.11***	0.015
	(0.016)	(0.022)	(0.021)
$\mathit{M}{P}_t\ast \mathit{CS}{R}_{\mathit{i},\mathit{t}}\ast (1-\mathit{M}{C}_{\mathit{s},\mathit{t}})$	0.013	0.035*	–0.011
	(0.014)	(0.021)	(0.017)
$\mathit{M}{P}_t\ast \mathit{M}{C}_{\mathit{s},\mathit{t}}$	0.071***	0.097***	0.030
	(0.014)	(0.021)	(0.018)
$\mathit{M}{P}_t\ast (1-\mathit{M}{C}_{\mathit{s},\mathit{t}})$	0.092***	0.16***	0.015
	(0.015)	(0.023)	(0.018)
Control variables	Yes	Yes	Yes
Firm-fixed effect	Yes	Yes	Yes
F-Statistic $({\beta }_1-{\beta }_2=0)$		4.38**
F-Statistic $({\beta }_{1,\mathit{H}}-{\beta }_{1,\mathit{L}}=0)$		9.36***
Observations	62,268	28,808	33,460
Number of firms	2,290	973	1,317
Adj-$R^2$	0.86	0.85	0.85

Note: Statistical significance: ***$\mathit{p}<0.01$; **$\mathit{p}<0.05$; *$\mathit{p}<0.1$. Heteroscedasticity robust standard errors clustered at the firm and quarter levels are reported in parentheses. This table presents the results of equation (5)(5) ${\epsilon }_{\mathit{i},\mathit{t}}$(5) : $\begin{array}{rl}& \mathit{T}{C}_{\mathit{i},\mathit{t}}={\beta }_0+{\beta }_1\ast \mathit{M}{P}_t\ast \mathit{CS}{R}_{\mathit{i},\mathit{t}}\ast \mathit{M}{C}_{\mathit{s},\mathit{t}}+{\beta }_2\ast \mathit{M}{P}_t\ast \mathit{CS}{R}_{\mathit{i},\mathit{t}}\ast (1-\mathit{M}{C}_{\mathit{s},\mathit{t}})\\ & +{\beta }_3\ast \mathit{M}{P}_t\ast \mathit{M}{C}_{\mathit{s},\mathit{t}}+{\beta }_4\ast \mathit{M}{P}_t\ast (1-\mathit{M}{C}_{\mathit{s},\mathit{t}})\\ & +{\beta }_5\ast \mathit{CS}{R}_{\mathit{i},\mathit{t}}\ast \mathit{M}{C}_{\mathit{s},\mathit{t}}+{\beta }_6\ast \mathit{CS}{R}_{\mathit{i},\mathit{t}}\ast (1-\mathit{M}{C}_{\mathit{s},\mathit{t}})\\ & +{\beta }_7\ast \mathit{M}{C}_{\mathit{s},\mathit{t}}+\mathrm{\Theta }\ast \mathbf{Fir}{\mathbf{m}}_{\mathit{i},\mathit{t}}+u_i+{\in }_{\mathit{i},\mathit{t},}\end{array}$ where $\mathit{M}{C}_{\mathit{s},\mathit{t}}$ is a dummy indicator which equals 1 if $\mathit{HH}{I}_{\mathit{s},\mathit{t}}$ is below the median value in period $\mathit{t}$ and 0 otherwise. $\mathit{T}{C}_{\mathit{i},\mathit{t}}$ denotes trade credit received of firm $\mathit{i}$ during period $\mathit{t}$. Recall that it is equal to the ratio of firm $\mathit{i}$‘s accounts payable ($\mathit{A}{P}_{\mathit{i},\mathit{t}}$) in period $\mathit{t}$ to one-period-lagged total assets ($\mathit{A}{T}_{\mathit{i},\mathit{t}-1}$). $\mathit{CS}{R}_{\mathit{i},\mathit{t}}$ denotes firm $\mathit{i}$‘s CSR in period $\mathit{t}$. $\mathit{M}{P}_t$ is the monetary policy index developed by Nakamura and Steinsson (2018). $\mathbf{Fir}{\mathbf{m}}_{\mathit{i},\mathit{t}}$ is a vector of time-varying firm variables (e.g., firm size, Tobin’s Q, and inventory stock) introduced in the previous section. We control for firm-fixed effects, $u_i$, in equation (5)(5) ${\epsilon }_{\mathit{i},\mathit{t}}$(5) . ${\text{isin}}_{\mathit{i},\mathit{t}}$ is the error term. Column (i) presents the results on the full sample. Columns (ii) and (iii) show the results on the high-liquidity-needs group and the low-liquidity-needs group, respectively. We use the ratio of inventories to sales to measure liquidity needs. The high group means that the ratio is above the median value, while the low group means the ratio is below the median. ${\beta }_{1,\mathit{H}}$ and ${\beta }_{1,\mathit{L}}$ are the estimators of the high group and the low group, respectively.

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