Supplier Financing and Earnings Quality

García‐Teruel, Pedro J.; Martínez‐Solano, Pedro; Sánchez‐Ballesta, Juan Pedro

doi:10.1111/jbfa.12090

Cited by 59 publications

(37 citation statements)

References 68 publications

(137 reference statements)

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“…TRDCRD mean value of 62.02% confirms the importance of trade credit in the short-term financing of our sample. These values are consistent with those reported in prior studies (e.g., García-Teruel et al 2014a). With regard to control variables, the significant level of dispersion in the values of these variables reflects the heterogeneity of our firm-year sample.…”

Section: Information Asymmetry Index Propertiessupporting

confidence: 91%

The short-term debt choice under asymmetric information

Abad

Sánchez‐Ballesta

Yagüe

2017

SERIEs

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This paper investigates whether the market level of information asymmetry affects firms' debt financing decisions. Using a sample of non-financial listed firms and a composite index based on microstructure measures of information asymmetry, we find that firms with more information asymmetry use shorter debt maturities. In addition, we find that these firms face more difficulties to access public debt and bank debt (particularly, short-term bank debt), and they have to rely on trade credit as an alternative source of short-term financing. Analyzing the associations in two subsamples based on firm size, we find that our results essentially driven by smaller companies, which are those affected by higher information asymmetries. Our findings support the information asymmetry theories of trade credit: as information asymmetry increases and, consequently, listed firms face more constraints in the credit markets, they increase the use of financing provided by their suppliers.

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Section: Information Asymmetry Index Propertiessupporting

confidence: 91%

The short-term debt choice under asymmetric information

Abad

Sánchez‐Ballesta

Yagüe

2017

SERIEs

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“…In these situations, earnings smoothing serves as information signaling, to mitigate agency problem of debt (Bigus & Häfele, 2016;Dou et al, 2013). García-Teruel et al (2014) find that SMEs (SMEs are characterized with high information asymmetry) with smoother earnings have more access to trade credit from suppliers.…”

Section: Asian Journal Of Finance and Accountingmentioning

confidence: 99%

Earnings Smoothing as Information Signaling or Garbling: A Review of Literature

Shabani

Sofian²

2018

AJFA

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Earnings smoothing, which refers to the action of managers managing earnings to reduce fluctuations of reported earnings, is a special type of earnings management because while earnings smoothing may be used to distort shareholders and creditors' view of corporate actual performance, it may also serve as a tool to communicate corporate private information of future earnings to the aforementioned stakeholders. Hence, it comes to no surprise when prior literatures reveal that the studies on the role of earnings smoothing are divided into two streams: as information signaling and information garbling. This paper aims to review prior literatures, specifically on the role of earnings smoothing either as information signaling or garbling based on four themes: firm value, financing need, compensation contract and outsiders' intervention. This paper reviews journal articles gathered from Web of Science database. Based on the shortcomings of prior literatures, this paper highlights avenue for future research.

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“…7 We provide detailed descriptions of each variable in the Appendix. 7 In regard to earnings disclosures, firm size and age are found to be associated with greater frequency and higher quality of corporate disclosure as young customers and small suppliers typically prefer trade credit (Lang and Lundholm, 1993;Petersen and Rajan, 1997;Cuñat, 2007;Garcia-Teruel, Martinex-Solano and Sanchez-Ballesta, 2014). The occurrence of negative corporate events may be less likely when institutional ownership is high if management perceives that their performance evaluation will be negatively affected by a negative stock price reaction to the announcement (Lang and McNichols, 1997).…”

Section: Sample Selection and Key Variablesmentioning

confidence: 99%

The Information Content of Short Selling Around Close Supply Chain Relationships

Evans

Outlaw

2018

The Financial Review

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Close supply chain relationships are sometimes detrimental to the partnering firms, and short sellers recognize this before the rest of the market. Suppliers and customers that are in linked, close supply chain relationships have higher short interest on average. Further, higher short interest increases the likelihood of large, linked customers reporting negative earnings surprises, whereas suppliers with high short interest are more likely to report negative earnings surprises, irrespective of the supply chain structure. Short selling is informative to capital markets because these suboptimal relationships eventually lead to dependent suppliers being delisted from a stock exchange for financial distress reasons.

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Supplier Financing and Earnings Quality

Cited by 59 publications

References 68 publications

The short-term debt choice under asymmetric information

The short-term debt choice under asymmetric information

Earnings Smoothing as Information Signaling or Garbling: A Review of Literature

The Information Content of Short Selling Around Close Supply Chain Relationships

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