Financial Reporting and Trade Credit: Evidence from Mandatory IFRS Adoption*

Xiao Li, Jeffrey Ng, Walid Saffar

Research output: Journal article publicationJournal articleAcademic researchpeer-review

26 Citations (Scopus)


We investigate the effect of mandatory IFRS adoption on trade credit. We document that firms in countries that adopt IFRS receive more trade credit from their suppliers, consistent with improved financial reporting quality and comparability playing a role in facilitating informal financing. This increase is larger for countries with a low level of societal trust, a poor pre-IFRS-adoption information environment, and stronger legal enforcement. These cross-sectional results suggest that the conditions under which higher-quality information is made publicly available affect suppliers' decisions to provide trade credit. This increase is also larger for firms with greater exposure to foreign markets, a finding that highlights the importance of more comparable international financial reporting standards in facilitating cross-country trade credit. We also find that IFRS adoption has a stronger positive effect on trade credit for firms with greater liquidity needs. Finally, we find that firms in countries that adopt IFRS also extend more trade credit to their customers. Overall, our results support the notion that financial reporting can have a causal effect on trade credit.

Original languageEnglish
Pages (from-to)96-128
Number of pages33
JournalContemporary Accounting Research
Issue number1
Publication statusPublished - 1 Mar 2021


  • crédit commercial
  • IFRS
  • information financière
  • normes comptables
  • risque lié à l'information
  • réglement

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics


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