Faculty of Business Administration

AIM Seminar

Customer Accounting Quality and Suppliers’ Cash Holdings


Dr. Tao Ma

Texas Tech University



We examine how customers’ accounting quality affects suppliers’ cash holdings along the supply chain. Using various measures of accounting quality, we document that suppliers hold more cash when transacting with customers with low accounting quality, and this effect is stronger when suppliers are financially constrained. We also find suppliers’ cash holdings are sensitive to customers’ accounting quality only when suppliers are from competitive industries, suggesting that suppliers bear the costs of holding more cash when industry competition is high. Our results are not driven by the asymmetric relation arising from customers that are larger than their suppliers. Lastly, consistent with our underlying assumptions, we document that customers with lower accounting quality indeed use more trade credit and suppliers experience a longer period converting this trade credit into cash. Overall, our results show that customers’ accounting quality exerts an externality on suppliers’ liquidity policy through trade credit.


Date:               13 Dec 2019 (Fri)

Time:              10:30-12:00

Venue:            E22-2007