Stock liquidity and trade credit of Vietnamese listed enterprises on the Vietnamese stock market

Abstract

This study examines the relationship between stock liquidity and two primary channels of trade credit—accounts receivable from customers and accounts payable to suppliers—among listed firms in Vietnam. Utilizing a balanced panel dataset comprising 298 companies listed on the Ho Chi Minh City and Hanoi Stock Exchanges over the period 2012–2023, the research applies the System Generalized Method of Moments (SGMM) estimation technique to effectively address potential endogeneity issues and ensure the reliability and robustness of the empirical results. The findings reveal that firms with higher stock liquidity tend to extend more trade credit to their customers, as evidenced by higher levels of accounts receivable, while simultaneously reducing their dependence on trade credit from suppliers, reflected in lower levels of accounts payable. This pattern suggests that improved stock liquidity enhances firms’ access to external financing channels, allowing them to be more proactive in funding operations, managing working capital, optimizing cash flow, and strengthening trade credit relationships. These findings highlight stock liquidity as a crucial financial transmission mechanism that influences corporate financing behavior and decision-making at the microeconomic level. From a policy perspective, the study underscores the importance of promoting stock market development and improving stock liquidity in Vietnam to foster a more efficient allocation of financial resources. Strengthening stock market liquidity not only facilitates firms’ ability to provide trade credit but also contributes to greater financial stability, operational flexibility, and overall competitiveness within the listed corporate sector. By contributing robust empirical evidence from an emerging market context, this research contributes to the growing literature on the interplay between financial market development and firm-level financial strategies, providing valuable insights for policymakers, investors, and corporate managers.