Customer's inventory accruals and supplier's earnings quality

  • Cheuk Kwong FOK

Student thesis: MPhil Thesis (Lingnan)


We examine the influence of customer’s inventory accruals on supplier’s accounting quality and earnings management practices. We consider two views of the role of customer’s inventory accruals play on their supplier and how they relate to their financial reporting. The first is the customer’s inventory accruals reflect supplier’s earnings management (i.e., intentional bias) as well as lead to difficulty in supplier’s earnings estimation (i.e., unintentional errors). The second view is based on supplier’s information advantage theory, which suggests suppliers are capable to interpret the information content of customer’s inventory accruals. In contrast to the information advantage view, we find that suppliers with higher level of customer’s inventory accruals have lower earnings quality and engage in more earnings management, evenafter controlling for their own inventory accruals level.
Date of Award20 Aug 2019
Original languageEnglish
Awarding Institution
  • Lingnan University
SupervisorLiming LIU (Supervisor) & Koon Hung CHAN (Co-supervisor)


  • inventory accruals
  • financial reporting
  • earnings quality
  • earnings management

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