Corporate culture and trade credit

G M Wali Ullah, Isma Khan and Mohammad Abdullah

International Review of Financial Analysis, 2025, vol. 103, issue C

Abstract: We examine how corporate culture affects a customer firm's ability to secure trade credit. Using a large US firm-level dataset of 46,020 firm-year observations spanning from 2002 to 2021, we document a positive and statistically significant association between strong corporate culture and the amount of trade credit received. Our results are robust to alternative specifications and endogeneity concerns, mitigated through two-stage least squares (2SLS) regressions using instrumental variables, entropy balancing, Heckman (1979) two-step correction and Oster (2019) test for omitted variable bias. The positive linkage is higher for companies with highly competent managers and those located in regions with high social capital. Our findings have implications for fostering trust and cooperation in business relationships.

Keywords: Corporate culture; Trade credit; Trade payable; Managerial ability; Social capital (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:103:y:2025:i:c:s1057521925002650

DOI: 10.1016/j.irfa.2025.104178

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