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 un-certainty 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 avoid-ance, 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.