How Does Competitive Strategy Influence the Complementary Between Trade Credit and Bank Credit

Abstract

As the main sources of financing, the optimal allocation between trade credit and bank lines of credit is crucial for the long-term development of enterprises. Based on Chinese A-share listed companies from 2000 to 2017, this paper examines the complementary relationship between trade credit and bank credit. Furthermore, comparing with cost leadership strategy, higher degree of differentiation strategy can enhance the bargaining power of suppliers by differentiated products and diversifying risks, so as to strength the complementary relationship between trade credit and bank credit. By employing a new method of natural language processing and deep learning to identify firm strategy from textual annual financial report, this article enriches the research of trade credit and bank credit, and is instructive for companies to make reasonable financing decisions based on their strategic characteristics.