Heterogeneous effects of public listing on the usage of trade credit: Evidence from Korean chaebol versus non-chaebol firms

Using a unique dataset of Korean firms, we demonstrate that the effects of public listing on the usage of trade credit are heterogeneous between chaebol and non-chaebol firms. While we find a significant negative relationship between public listing and the usage of trade credit for non-chaebol firms, we do not find any significant relationship for chaebol firms. Consistent with prior literature, public listing allows non-chaebol firms to have greater access to cheaper and less risky sources of external capital, thereby relying less on supplier financing, that is, using less trade credit. The lack of a significant impact for chaebol firms could be attributed to the effectiveness of their internal capital markets, which relax their financial constraints. These findings provide additional evidence supporting well-functioning internal capital markets among Korean chaebol firms.