Beggars cannot be choosers? Legitimacy deficiency and the use of trade credit by family firms

Abstract

AbstractWhile prior literature conceives financial distress as the primary driver of trade credit usage, organisational idiosyncratic characteristics and the situated institutional environment may also play a role. Building on the legitimacy‐based view, this study investigates whether family firms (FFs) – a special group of firms that are relatively understudied in the finance and accounting literature – in transitioning economies like China exhibit unique patterns of the use of trade credit. We found that increased family ownership leads to more usage of trade credit. Such inclination is stronger among FFs undergoing intergenerational succession, whereas it is weaker for FFs located in more developed subnational regions.