Research Journal of Finance and Accounting www.iiste.org ISSN 2222-1697 (Paper) ISSN 2222-2847 (Online) DOI: 10.7176/RJFA Vol.10, No.12, 2019 112 The Influence of Accounting Information Quality on Trade Credit with Inventory Liquidation Cost as Moderating Variable Nanda Fito Mela * Adhitya Agri Putra Lecturer at the Faculty of Economics and Business, University of Riau, Campus Binawidya KM.12,5 Simpang Baru, Tampan, Pekanbaru, Riau, 28296 Abstract This research is aimed to examine (1) effect of accounting information quality on trade credit, (2) moderating role of inventory liquidation cost on the effect of accounting information quality on trade credit. Research sample are 122 manufacture companies listed in Indonesian Stock Exchange 2013-2016. Data analysis uses multiple regression test. Results show that accounting information quality has effect on trade credit usage. It indicates that suppliers advantages of free of information asymmetric, direct involvement to company’s business activities, and higher recovery rate of payment failure makes suppliers are less likely to use accounting information to evaluate company’s credit worthiness; further, it leads to high tr ade credit fund resource used by company with low accounting information quality. Inventory liquidation cost moderates the effect of accounting information quality on trade credit usage. It indicates that suppliers will give trade credit for company with low accounting information quality if inventory liquidation cost is low. Keywords: Accounting Information Quality, Trade Credit, Inventory Liquidation Cost DOI: 10.7176/RJFA/10-12-14 Publication date:June 30 th 2019 1. Introduction One of accounting information user is capital provider; such as investor or creditor. They use accounting information to evaluate company’s worthiness if company is worth to get their funds. The funds can be equity capital (investor fund resource), debt capital (bank and financial institution fund resource), and trade credit (supplier fund resource). Important role of accounting information leads to the important of accounting information quality. High quality accounting information helps capital provider evaluate company accurately. Bhattacharya et al.(2013) states that High quality accounting information can reduces information asymmetric, so capital provider can count on accounting information as important source of information in company risk evaluation and monitoring. Previous researches too much focus on relationship between information quality and equity and debt capital, such as Bharathet al.(2008) that examines information quality on cost of debt, Francis et al.(2004, 2005)and Garcia Lara et al.(2011)that examines information quality on cost of debt and equity, Biddle and Hilary (2006)that shows company with low information quality use internal fund resource. In Indonesia, Moh.Nasih et al.(2016)find that earnings quality and information asymmetric have effect on cost of equity. Chen et al.(2017)states that there is no researches that examines information quality and trade credit directly until 2017. This research focuses on trade credit because it has important role as fund resource to support core business activities directly. Wilson and Summers (2003) also states that trade credit is important external resource fund for companies in emerging country, such as Indonesia. Geand Qiu(2007)also support the argument that trade credit has important role in emerging economics because limited access of resource fund from banks. In Indonesian Stock Exchange (IDX), average of manufacture companies trade credit increases from 2013- 2017. Based on this research data proceed (2019), there is increasing of trade credit for manufacture companies in IDX from Rp. 687 billionin 2013 to Rp. 897 billion in 2017. It indicates that, in Indonesia,there is big demand of trade credit to support manufacture companies business activities. Chen et al.(2017)states that existence of information asymmetric makes bank and financial institution so much depends on accounting information.Investor and debt provider need more accounting information than suppliers. Suppliershave more advantages than financial institution and bank, because suppliers do not depend on accounting information only. Suppliers can get information directly through daily business transactions(Chen et al., 2017). Even there are some financial institutions have access to private information, suppliers can get private information fast and low cost, because it is enough to see company normal business activities (Petersen and Rajan, 1997). Companies with high information quality have better access on equity and debt financing(Chen et al., 2017), while companies with low information quality have difficult access on equity and debt financing. It makes companies with low accounting information quality tend to use trade credit from suppliers. The lower accounting information quality, the higher trade credit usage is. Chen et al.(2017)explains that there is still possibility of information asymmetric between suppliersand companies. It happens because supplier is smaller than companies or because new suppliers that do not know yet brought to you by CORE View metadata, citation and similar papers at core.ac.uk provided by International Institute for Science, Technology and Education (IISTE): E-Journals