Trade Receivables Action of Financial Distressed Companies - Evidence from China's Listed Companies

Using the sample of 257 China's listed companies 3341 observations between 1996 and 2008, this paper studies the trade receivables action of financial distressed companies. We find a negative effect of financial distress on trade receivables, which implies that firms reduce their trade receivables when they are in financial distress. We also find that distressed companies in East China, South China and Northeast reduce their trade receivables; distressed companies in Northwest increase their trade receivables; and there are no significant relationship between trade receivables and financial distress for those distressed companies in North China, Central China and Southwest.