Accounting quality and trade credit

Deqiu Chen, Ming Liu, Tao Ma, Xiumin Martin

Research output: Contribution to journalArticlepeer-review

26 Scopus citations


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
Issue number3
StatePublished - Sep 2017


  • Accounting quality
  • Trade credit


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