Supplier Financing and Earnings Quality

Supplier Financing and Earnings Quality

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...

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Bibliographic Details
Published in:Journal of business finance & accounting Vol. 41; no. 9-10; pp. 1193 - 1211
Main Authors: García-Teruel, Pedro J., Martínez-Solano, Pedro, Sánchez-Ballesta, Juan P.
Format: Journal Article
Language:English
Published: Oxford Blackwell Publishing Ltd 01-11-2014
Subjects:
Accruals
accruals quality
Cash flow
Credit
Earnings
earnings predictability
earnings quality
earnings variability
Small & medium sized enterprises-SME
Small and medium sized enterprises
smoothness
Studies
suppliers financing
Trade
trade credit
Trade finance
Volatility
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Summary: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.
Bibliography:istex:2627BBD2DFDFBD6B87B5EF3A217E4BA22252BD8F
ArticleID:JBFA12090
ark:/67375/WNG-Q85N43M4-D
The first and second authors are from Department of Management and Finance, University of Murcia, Campus de Espinardo, Murcia, Spain. The third author is from Department of Accounting, University of Murcia, Campus de Espinardo, Murcia, Spain. The authors thank an anonymous referee and the editor, Andrew Stark, for their comments and suggestions, which have helped to improve this paper. The authors also acknowledge financial support from “Fundación CajaMurcia”.
ObjectType-Article-1
SourceType-Scholarly Journals-1
ObjectType-Feature-2
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ISSN:0306-686X
1468-5957
DOI:10.1111/jbfa.12090