Trade Credit in Europe: 'It is All Down to Culture'
55 Pages Posted: 15 Jul 2016
Date Written: January 14, 2016
Abstract
This article examines trade credit decision in Western Europe using a comprehensive sample of 182,296 SMEs for the period 2003-2013. We develop a theoretical framework based on information asymmetry, financial distress and the role of country informal institutions. The results show that country cultural norms play a key role in explaining trade credit differences in a European region that share common formal institutional characteristics. We find that in countries with high power distance, high individualism, high masculinity, and high uncertainty avoidance rely more on trade credit. These results are robust to a range of alternative variable measurements, conventional control variables and specifications.
Keywords: Trade Credit, Culture, SMEs, Bank Credit
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