Confucian Culture and Trade Credit: Evidence from Chinese Listed Companies

Wanli Li, Xixiong Xu and Zhineng Long

Research in International Business and Finance, 2020, vol. 53, issue C

Abstract: This paper examines the effect of cultural factors on the use of trade credit, an important non-formal financial channel. Using a sample of Chinese listed companies from 2007–2017, we find that firms headquartered in regions with a stronger Confucianism atmosphere can obtain more trade credit than their peers elsewhere. Further, the positive association between Confucianism and trade credit is more prominent for non-state-owned enterprises and firms located in regions with underdeveloped financial markets. Overall, our results highlight that Confucian culture—as an implicit value norm and an ethical philosophy—plays an important positive role in fostering honesty, and thus, promoting the use of trade credit. It enriches the literature on the determinants of trade credit and provides insights on the impact of Confucianism on corporate behavior and its underlying mechanism.

Keywords: Confucianism; Trade credit; Informal finance (search for similar items in EconPapers)
JEL-codes: G30 G32 O17 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (21)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:53:y:2020:i:c:s0275531919309316

DOI: 10.1016/j.ribaf.2020.101232

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