When nature bites: how biodiversity risk affects trade credit

Purpose The purpose of this study is to examine how biodiversity risk exposure affects corporate behavior, specifically focusing on the provision of trade credit by suppliers. While biodiversity loss is increasingly recognized as a significant global risk to corporations, there is still limited understanding of how it influences financial decisions at the firm level. This research aims to fill that gap by investigating the extent to which biodiversity risk exposure shapes access to trade credit, a critical component of corporate liquidity. Design/methodology/approach The study adopts an empirical approach to analyze the relationship between biodiversity risk exposure and trade credit granted by suppliers. It employs rigorous econometric techniques to address potential endogeneity concerns, ensuring the robustness of the results. Additionally, the analysis includes subsample tests to explore how this relationship varies among firms with differing levels of competitive pressure and public visibility, thereby capturing the heterogeneity in corporate responses to biodiversity risk. Findings The findings reveal that firms facing higher biodiversity risk receive significantly less trade credit from suppliers, suggesting that such risk undermines financial resilience in supply chain relationships. This negative effect is more pronounced in firms operating under strong competitive conditions and in those with lower levels of public awareness. The results are robust to various endogeneity tests and point to a novel channel through which biodiversity risk can influence corporate liquidity policy. Originality/value This study makes a novel contribution to the emerging literature on environmental risks and corporate finance by uncovering a previously unexplored link between biodiversity risk exposure and trade credit extended by suppliers. By highlighting how biodiversity-related vulnerabilities influence supplier behavior and liquidity policies, the research offers fresh insights into the financial consequences of environmental degradation. It also emphasizes the strategic importance of considering biodiversity risk not only from a sustainability standpoint but also as a key factor in maintaining financial stability within supply chain networks.