Access to public capital markets and the extension of trade credit: An empirical analysis of Korean public and private firms

Using a large dataset of Korean public and private firms, we show that public listing does not influence the supply of trade credit among firms affiliated with a large business group (chaebol). Meanwhile, non-affiliated public firms provide more trade credit to customers than their private counterparts. Public listing allows non-affiliated firms to have greater access to cheaper sources of external capital, thereby increasing the supply of trade credit. However, the results for chaebol-affiliated firms may be attributed to well-functioning internal capital markets. Our results shed light on the substitution between internal and external capital markets.