Financial Reporting Quality and Private Firms’ Access to Trade Credit Capital

The International Journal of Accounting, Forthcoming

52 Pages Posted: 26 Apr 2021

See all articles by Anastasios Elemes

Anastasios Elemes

ESSEC Business School

Andrei Filip

Catholic University of Lille - IESEG School of Management

Date Written: April 16, 2021

Abstract

Prior research suggests that suppliers are able to fund opaque and credit-rationed customers because they rely heavily on insider communication channels to resolve information asymmetry. In this paper we examine the association between financial reporting quality and trade credit financing for a large sample of private firms from Europe’s five largest economies, i.e., France, Germany, Italy, Spain, and the United Kingdom. We find strong evidence that high quality financial reporting is associated with more trade credit financing and that this relation is stronger when information asymmetry and uncertainty about future cash flows is high, as well as when credit is rationed. Our findings suggest that suppliers complement insider communication channels and financial reporting quality and provide a more nuanced understanding of the interplay among information asymmetry, credit rationing, and trade credit financing.

Keywords: private firms, financial reporting quality, trade credit, information asymmetry, credit rationing

JEL Classification: M40, M41

Suggested Citation

Elemes, Anastasios and Filip, Andrei, Financial Reporting Quality and Private Firms’ Access to Trade Credit Capital (April 16, 2021). The International Journal of Accounting, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3827649 or http://dx.doi.org/10.2139/ssrn.3827649

Anastasios Elemes (Contact Author)

ESSEC Business School ( email )

3 Avenue Bernard Hirsch
CS 50105 CERGY
CERGY, CERGY PONTOISE CEDEX 95021
France

Andrei Filip

Catholic University of Lille - IESEG School of Management ( email )

Socle de la Grande Arche
1 Parvis de la Defense
Puteaux, Paris 92800
France

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