Information Disclosure Quality And Trade Credit

Trade credit refers to a credit relationship, which is formed by the late payments orreceipts in advance in the normal operating activities and commodity trading. Both developedand developing countries, companies are generally providing customers with trade credit.Trade credit as a means of financing, it occupies an important position in the short-termfinancing. Trade credit is more important for Chinese enterprises, and the role it plays in thenational economy is also increasing. With trade credit is widely used, the academic circlesalso will be more inclined to focus on it.This paper examines the relationship between information disclosure quality and modeof trade credit. We adopt empirical research methods, supplemented by the necessarytheoretical explanation. From the perspective of theory and practice we make empirical study,we think that high information disclosure quality can relieve the information asymmetrybetween providers and enterprises to help them build trust, thereby reducing costs in thecourse of dealing between the parties. We draw the following conclusions: when theinformation disclosure quality is higher, the supplier offers the credit terms with lowertransaction cost. In addition, taking into account the nature of ownership and the macromarket environment, relative to non-state-owned enterprises, the fatherly effect ofgovernment is more helpful for the formation of a trust relationship between the state-ownedenterprises and their suppliers. When the macro market environment is better, enterprises andsuppliers sign and perform contracts with good public compliance environment, which alsocontribute to the formation of the trust relationship. They both have an impact on the choiceof the mode of trade credit. The study found that, indeed, the relationship would be moreobvious in the state-owned enterprises and better market environment.