The Effect of Corporate Governance on the Relationship between Accounting Quality and Trade Credit: Evidence from Japan


This study investigates the effect of shareholdings on the relationship between accounting quality and trade credit in Japan. It focuses on cross- and stable shareholdings, which are well-known features of Japanese corporate governance, as a private information sharing system. The relationship between cross- and stable shareholdings, accounting quality, and trade credit is tested. The results reveal that trade credit of customers without either cross- or stable shareholdings increases with accounting quality and that such shareholdings weaken the relationship between accounting quality and trade credit. The findings suggest that a close tie to cross- and stable shareholders results in reducing the importance of accounting information through sharing private information.


Trade credit, Accounting quality, Cross-shareholdings, Stable shareholdings

JEL Classification

G34, M41


Masahiro ENOMOTO
Research Institute for Economics and Business Administration,
Kobe University
Rokkodai-cho, Nada-ku, Kobe
657-8501 Japan
Phone: +81-78-803-7036
FAX: +81-78-803-7059