This study investigates the relationship between anti-financial crime activities and trade credit (TC) financing, exploring whether such activities reduce reliance on the costly TC financing and enhance access to less expensive long-term debt (LTD). This research aims to address the debate on the role of nonfinancial information, such as anti-financial crime practices, in impacting creditors’ decisions.
Using data from public companies obtained through the S&P Capital IQ database, this study covers the period from 2019 to 2021. Multivariate regression analyses are used to assess the impact of four key anti-financial crime activities – corruption reporting, addressing bribery cases, whistleblowing policies and codes of conduct – on TC financing and LTD.
The descriptive statistics highlight that most firms inadequately address financial crime, except for whistleblowing policies, which are mandated under the Sarbanes-Oxley Act. The results demonstrate a negative and significant relationship between anti-financial crime activities and TC financing, indicating that firms engaging in these activities rely less on costly TC. In addition, our results reveal a positive association between anti-financial crime activities and LTD, suggesting that increased transparency and reduced financial risk enable firms to access less expensive conventional funding.
This paper contributes to the literature by establishing the role of anti-financial crime activities in shaping firms’ financing choices, providing empirical evidence of their impact on creditors’ decision-making. It reveals the importance of transparency and governance in reducing financing costs and improving access to conventional funding, offering valuable insights for regulators, creditors and investors.
