Does national culture impact trade credit provision of SMEs?

Trade credit provision considerably varies from country to country, especially among small- and medium-sized enterprises (SMEs). However, there is scant literature on the determinants of such variations. Thus, this study determines how cultural differences contribute to this dissimilarity by using a sample of 12,257 manufacturing companies from 37 countries spanning the period of 1998–2018. In this case, culture is measured by both collectivism and uncertainty avoidance. Based on the results, there is a positive effect of collectivism and uncertainty avoidance on the provision of trade credit, through a reduction of asymmetric information between companies and their customers. We also found that in countries with high collectivism and uncertainty avoidance, the increase in trade credit provision is more pronounced for firms with unstable demand/low reputations or firms that are financially unconstrained. Our findings make an important contribution to the understanding of credit flows among SMEs outside formal financial systems.