The Impact of Corruption on SMEs’ Trade Credit Management Effectiveness

Werner Henk Otto ()
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Werner Henk Otto: Department of Business Management, University of the Free State, Bloemfontein 9301, South Africa

JRFM, 2024, vol. 17, issue 12, 1-29

Abstract: The continued rise in SMEs’ corruption-related activities results in uncertainty around their ability to sustainably contribute to economic growth, leaving SMEs financially fragile and exposed to problems associated with trade credit management resulting in business exits. Given that little research has been conducted on how corruption affects smaller businesses while corruption’s impact on SMEs’ trade credit management effectiveness remains largely unexamined, the study aims to determine the impact of corruption on SMEs’ trade credit management effectiveness. By addressing this unanswered research gap, SMEs could be better equipped to understand how corruption affects their trade credit management in support of their overall finances. The study employed a quantitative research design with purposive sampling using a survey by administrating 10450 online questionnaires tested by a sample of 450 SMEs across South Africa. The result aligns with expectations around corruption being detrimental to SMEs’ trade credit management effectiveness while also indicating, unexpectedly, SMEs’ willingness to partake in corruption, given that SMEs benefit from increased effectiveness in managing trade credit. The study adds to the existing literature on corruption and SMEs’ trade credit management while also providing anti-corruption recommendations to SMEs that are dependent on trade credit. In so doing, SMEs could be better equipped to understand how corruption affects their trade credit management to support their overall finances contributing to improved SME creation rates and fostering entrepreneurship as a pivotal mechanism for improving South Africa’s sustainable development goals.

Keywords: corruption; trade credit management effectiveness; SMEs (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2024
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