Replication Package: COVID-19 and Trade Credit Financing

This repository contains the dataset and Stata code required to replicate the empirical results of the paper:

"The effect of the COVID-19 pandemic on corporate trade credit financing" > Economics Letters (2023)
Authors: Wenlan Xie, Haowen Tian
DOI: 10.1016/j.econlet.2023.111339

📂 Repository Structure

• code/: Stata do-files for data processing and analysis.
  • 0_master.do: The master script that executes the entire workflow.
  • 1_build.do: Imports raw data, cleans outliers, and constructs variables.
  • 2_analysis.do: Generates summary statistics and regression tables (DiD).
• data/:
  • raw/: Contains the raw input file (TradeCredit_Data.xlsx).
  • derived/: Stores the cleaned .dta files (generated by the code, not tracked by git).
• output/: Contains the generated regression tables in RTF format.

🚀 Usage Instructions

1. Clone this repository to your local machine.
2. Open code/0_master.do in Stata.
3. Edit Line 12: Change the global path root to the location where you saved this repository.

   global root "C:/path/to/your/repository"

4. Run 0_master.do.
   • The script will automatically install required packages (reghdfe, estout, winsor2).
   • It will process the data and output tables to the output/ folder.

📊 Methodology Summary

The study utilizes a Difference-in-Differences (DiD) approach to examine how supply chain disruptions and bank lending costs during the pandemic influenced trade credit.

• Model: $TC_{i,t} = \alpha + \beta (Pandemic \times Treat) + Controls + FixedEffects + \epsilon_{i,t}$
• Identification: The code utilizes reghdfe to absorb high-dimensional Firm and Year fixed effects, with standard errors clustered at the firm level.

Appendix: Variable Definitions

The following table details the construction of all variables used in the analysis, consistent with the original paper's appendix.

Table A1: Variable Definitions

Variable	Symbol	Definition
Dependent Variables
Trade Credit 1	TC1	The sum of accounts payable, scaled by total assets.
Trade Credit 2	TC2	The sum of accounts payable and notes payable, scaled by total assets.
Net Trade Credit	TC3	The sum of accounts payable and notes payable, minus the amounts collected in advance, scaled by total assets.
Independent Variables
Pandemic	Pandemic	A dummy variable which equals one if the year falls within the pandemic period (year $\ge$ 2020), otherwise zero.
Treatment	Treat_HighCase	A dummy variable which equals one if the firm's province ranks in the top 50% of cumulative confirmed cases during the sample period, otherwise zero.
Control Variables
Size	Size	The natural logarithm of total assets.
Leverage	Leverage	The ratio of total debt to total assets.
ROA	ROA	The ratio of net income after tax to total assets.
Growth	Growth	The yearly growth rate in sales revenue.
PPE	PPE	The ratio of property, plant, and equipment to total assets.
CFO	CFO	The ratio of net operating cash flow to total assets.
Loss	Loss	A dummy variable which equals one if the company's net profit is greater than zero, otherwise zero.
Dual	Dual	A dummy variable which equals one if the CEO also serves as the chairperson of the board of directors, otherwise zero.
Top1	Top1	The percentage of shares held by the largest shareholder.
Top5	Top5	The percentage of shares held by the top five shareholders.
HHI	HHI	The Herfindahl–Hirschman Index, representing the sum of the squared market shares of all firms within each industry-year.
Big4	Big4	A dummy variable which equals one for firms audited by Big4 auditing firms, otherwise zero.
Indep	Indep	The proportion of independent directors to board members.
Board	Board	The logarithm of total directors' number.
SOE	SOE	A dummy variable which equals one for state-owned enterprises, otherwise zero.
Bank	Bank	The ratio of the sum of short-term and long-term debt to total debts.
Age	Age	The natural logarithm of the company's age in capital market.
Liquidity	Liquidity	The lagged value of current assets divided by short-term liabilities.

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For any questions regarding the replication code, please open an Issue in this repository.