<p>Trade credit provisions to related-party customers (RPCs) represent an underexplored ethical dimension in corporate governance. Using detailed accounts receivable data from Chinese listed firms, this study examines how ethical considerations and regulatory environments affect firms’ trade credit policies toward RPCs. Our analysis demonstrates that firms systematically provide significantly less trade credit to RPCs relative to non-RPCs, especially under high customer concentration, strong supply chain bullwhip effects, and intense industry competition, reflecting firms’ sensitivity to compliance pressure and financial risk management. Additionally, firms strategically extend greater trade credit when RPC identities are anonymized or intentionally obscured, balancing transparency obligations against opportunistic incentives. Clearly defined RPCs receive less credit due to stronger regulatory oversight, whereas unspecified RPCs benefit from deliberate nondisclosure aimed at circumventing scrutiny. Providing less trade credit to explicitly disclosed RPCs mitigates shareholder expropriation, leads auditors to impose higher abnormal audit fees, encourages long-term lending, reduces stock volatility, and promotes operational diversification. Overall, this study highlights ethical tensions and regulatory challenges firms face when managing transparency, compliance, and strategic objectives in RPC-related trade credit.</p>