Examining the Relationship between Earnings Quality and Trade Credit

Document Type : Original Article

Authors

1 Assistant Professor of Accounting, University of Tehran

2 M.A. Student of Accounting, University of Tehran

Abstract

For investors and other stakeholder like creditors, earnings is very important. Trade credit has an important role in financing policy of a company. There are ways that creditors can protect themselves from loss; one of them is evaluating finance situation of their customers. The purpose of this study is to examine the relationship between earnings quality and trade credit. A sample of 88 listed companies in Tehran stock exchange between 2008 and 2013 formed this study. Accruals quality and volatility of earnings were used as proxies for earnings quality. We used the model developed by Dechow and Dichev (2002) to measure accruals quality. Earnings volatility was also measured according to Francis et al (2004). The findings of the study showed no relationship between earnings volatility and trade credit but indicated significant positive relationship between accruals quality and trade credit.

Keywords


حقیقت، ح. و معتمد، م. (1390). ”بررسی رابطة بین نوسان‌پذیری و قابلیت پیش‌بینی سود“. مجله پیشرفت‌های حسابداری دانشگاه شیراز، 3 (2)، پیاپی 3/61، 65-87.##
خواجوی، ش.، قدیریان‌آرانی، م. و فتاحی، ح. (1393). ”بررسی رابطة کیفیت سود و تعدیلات سنواتی شرکت­های پذیرفته شده در بورس اوراق بهادار تهران“. مجله بررسی­های حسابداری، 1 (3)، 19-39. ##
دستگیر، م. و رستگار، م. (1390). ”بررسی رابطة بین کیفیت سود (پایداری سود)، اندازة اقلام تعهدی و بازده سهام با کیفیت اقلام تعهدی“. مجله پژوهش­های حسابداری مالی، 3 (1)، 1-20. ##
دستگیر، م. و غنی‌زاده، ب. (1393). ”تأثیر کیفیت سود بر دارایی­های ثابت مشهود و سرمایه‌گذاری‌های بلندمدت“. فصلنامه پژوهش‌های حسابداری مالی و حسابرسی، 6 (23)، 75-97. ##
رحیمیان، ن.، و همتی، ح. و سلیمانی‌فرد، م. (1391). ”بررسی ارتباط بین کیفیت سود و عدم تقارن اطلاعاتی در شرکت­های پذیرفته شده در بورس اوراق بهادار تهران“. مجله دانش حسابداری، 3 (10)، 157-181. ##
قربانی، ب.، فروغی، د. و امیری، ه. (1392). ”تأثیر کیفیت سود بر تغییرات بازده غیر متعارف سهام“. تحقیقات حسابداری و حسابرسی، 6 (23)، 36-55. ##
نیکومرام، ه. و امینی، پ. (1390). ”کیفیت سود و هزینة سرمایه“. دانشمالی تحلیلاوراقبهادار، 4 (10)، 183-215. ##
Bharath, S.T., Sunder, J. and Sunder, S.V. (2008). “Accounting Quality and Debt Contracting”. The Accounting Review, 83 (1): 1-28. ##
Bhattacharya, N., Ecker, F., Per. M. Olsson and K. Schipper. (2011). “Direct and Mediated Associations Among Earnings Quality, Information Asymmetry, and the Cost of Equity”. Accounting Review, 87 (2): 449-482. ##
Boissay, F and Gropp, R. (2007). Trade Credit Defaults and Liquidity Provision by Firms, European Central Bank Working paper series. ##
Bougheas, S., Mateut, S. and Mizen, P. (2009). “Corporate Trade Credit and Inventories: New Evidence of a Trade-off from Accounts Payable and Receivable”. Journal of Banking and Finance, 33 (2): 300-307. ##
Cunat, V. (2007). “Trade Credit: Suppliers as Debt Collectors and Insurance Providers”. Review of Financial Studies, 20 (2): 491-527. ##
Dechow, P. and Dichev, I. (2002). “The Quality of Accruals and Earnings: The Role of Accrual Estimation Errors”. The Accounting Review, 77 (s-1): 35-59. ##
Dechow, P., Ge, W. and Schrand, C. (2010). “Understanding Earnings Quality: A Review of their Proxies, their Determinants and their Consequences”. Journal of Accounting and Economics, 50 (2-3): 344-401. ##
Deloof, M. and Jegers, M. (1996). “Trade Credit, Product Quality, and Intragroup Trade: Some European Evidence”. Financial Management, 25 (3): 33-43. ##
Ferrando, A. and Mulier, K. (2012). Do Firms Use the Trade Credit Channel to Manage Growth? Working Paper.
Francis, J., LaFond, R., Olsson, P.M. and Schipper, K. (2004). “Costs of Equity and Earnings Attributes”. The Accounting Review, 79 (4): 967-1010.
Francis, J., LaFond, R., Olsson, P.M. and Schipper, K. (2005). “The Market Pricing of Accruals Quality”. Journal of Accounting and Economics, 39 (2): 295-327.
Gertler, M. and Bernanke, B.S. (1995). “Inside the Black Box: the Credit Channel of Monetary Policy Transmission”. Journal of Economic Perspectives, 9 (4): 27-48. ##
Giannetti, M., Burkart, M. and Ellingsen, T. (2011). “What You Sell Is What You Lend? Explaining Trade Credit Contracts”. Review of Financial Studies, 24 (4): 1261-1298. ##
Graham, J.R., Harvey, C.R. and Rajgopal, S. )2005(.“The Economic Implications of Corporate Financial Reporting”. Journal of Accounting and Economics, 40 (1-3): 3-73. ##
Healy, P.M. and Palepu, K.G. (2001). “Information Asymmetry, Corporate Disclosure, and the Capital Markets: A Review of the Empirical Disclosure Literature”. Journal of Accounting and Economics, 31(1-3): 405-440. ##
Lee Y.W. and Stowe, J.D. (1993). Product Risk, Asymmetric Information, and Trade Credit”. Journal of Finance and Quantitative Analysis, 28 (2): 285-300. ##
Long, M.S., Malitz, I.B. and Ravid, S.A. (1993). “Trade Credit, Quality Guarantees, and Product Marketability”. Financial Management, 22 (4): 117-27. ##
Mian, S. and Smith, C. (1992). “Accounts Receivable Management Policy: Theory and Evidence”. Journal of Finance, 47 (1): 167-200. ##
Niskanen, J. (2006). “The Determinants of Corporate Trade Credit Policesin a Bank-Dominated Financial Environment: the Case of Finnish Small Firms”. European Financial Management, 12 (1): 81-102. ##
Petersen, M. and Rajan, R. (1997). “Trade Credit: Theories and Evidence”. Review of Financial Studies, 10 (3): 661-691. ##
Pike, R. and Cheng, N.S. (2001). “Credit Management: An Examination of Policy Choices, Practices and Late Payment in UK Companies”. Journal of Business Finance & Accounting, 28 (7-8): 1013-1042. ##
Pike, R., Cheng, N.S., Cravens, K. and Lamminmaki, D. (2005). “Trade Credits Terms: Asymmetric Information and Price Discrimination Evidence from Three Continents”. Journal of Business Finance & Accounting, 32 (5-6): 1197-1236. ##
Scherr, F.C. and Hulburt, H.M. (2001). “The Debt Maturity Structure of Small Firms”. Financial Management, 30 (1): 85-111. ##
Sloan. R. (1996). “Do Stock Prices Fully Reflect Information in Accruals and Cash Flows about Future Earnings?”. The Accounting Review, 71 (3): 289-315. ##
Teruel, G.J. Solano, P.M. and Ballesta, J.S. (2014). “Supplier Financing and Earnings Quality”. Journal of Business Finance&Accounting, 41 (9) & (10): 1193-1211. ##
Trueman, T. and Titman, S. (1988). “An Explanation for Accounting Income Smoothing”. Journal of Accounting Research, 26 (supplement): 127-139. ##