Product Quality and Trade Credit: Empirical Investigation into the Trade Credit from Quality Assurance Motivate in China

Evidences from foreign countries show that trade credit signals the product quality. Through an empirical research based on the panel data of listed manufacturing firms in China from 2001 to 2003, the result indicates that the big-size firm has more warranty in its product quality, thus less credit and short time payment terms is provided. Those firms, with high-tech products and a large amount of R & D, provide more trade credit and longer time payment terms.