Supplier Financing and Earnings Quality

Pedro J. García‐Teruel · Pedro Martínez Solano · Juan Pedro Sánchez‐Ballesta

78 citations0/0 files storedJournal of Business Finance &amp Accounting

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Working Capital and Financial Performance Corporate Finance and Governance Auditing, Earnings Management, Governance

Abstract

Abstract In this paper we investigate the effect of earnings quality on supplier credit in a sample of small and medium‐sized firms. After controlling for other determinants of trade credit, we show that firms whose earnings present lower variability, higher smoothing and predictability, and higher accruals quality have access to more trade credit from suppliers. This association suggests that earnings attributes associated to lower volatility and higher precision with respect to cash flows facilitate access to trade credit.

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References

1998Law and Finance 1997Legal Determinants of External Finance 2001Information asymmetry, corporate disclosure, and the capital markets: A review of the empirical disclosure literature 2005The economic implications of corporate financial reporting 2003Earnings management and investor protection: an international comparison 2002The Quality of Accruals and Earnings: The Role of Accrual Estimation Errors 2010Understanding earnings quality: A review of the proxies, their determinants and their consequences 1998The economics of small business finance: The roles of private equity and debt markets in the financial growth cycle

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