Does Risk Disclosure Matter for Trade Credit?

Abstract

In this paper, we examine the impact of risk disclosure practices on trade credit. We hypothesize that risk information could reduce information opacity that arises between companies and their suppliers. We collected annual reports for Tunisian listed companies for the period 2008–2013. This gives us 146 firm-year observations. We find that risk disclosure has a positive impact on the level of trade credit. Our paper offers a new empirical evidence on the role of risk disclosure in reducing information asymmetry and increase companies’ access to short-term external funds. Our study provides managerial implications for firms, suppliers, and regulatory authorities.

Linguistic attributes and trade credit: Evidence from textual analysis of earnings conference calls

“…As suppliers tend to rely more on publicly available information (Arruñada 2011), it is even more important for customer firms to manage information environment for suppliers. Prior literature indicates that soft information conveyed through linguistic cues (i.e., tone) can help mitigate information asymmetry and information misinterpretation (e.g., Blau et al, 2015;Chen et al, 2018;Haj-Salem & Hussainey, 2021;Spence 1978). Price et al (2012) document that tone is related to future performance and the market reacts positively to the tone.…”