Accounting quality and trade credit

Deqiu Chen, Ming Liu, Tao Ma, Xiumin Martin

Research output: Contribution to journalArticle

13 Scopus citations

Abstract

SYNOPSIS: We examine whether firms with low accounting quality are more likely to use trade credit as a source of financing. Because of their advantages in overcoming information frictions, suppliers are more likely to provide trade credit to customers with low accounting quality. We therefore expect firms’ use of trade credit to decrease with their accounting quality. We find results consistent with this prediction. We also find that this negative relation is more pronounced for customers with low inventory liquidation costs and high firm-wide information asymmetry. Our findings extend the literature linking firms’ accounting quality to financial decisions.

Original languageEnglish
Pages (from-to)69-83
Number of pages15
JournalAccounting Horizons
Volume31
Issue number3
DOIs
StatePublished - Sep 2017

Keywords

  • Accounting quality
  • Trade credit

Fingerprint Dive into the research topics of 'Accounting quality and trade credit'. Together they form a unique fingerprint.

Cite this