Corporate culture and trade credit

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. • Firms with strong corporate culture receive more trade credit from their suppliers. • It is more pronounced for firms with higher managerial ability and located in high social capital regions. • The findings remain consistent to alternative specifications and endogeneity concerns. • Corporate culture promotes trust and cooperation in customer-supplier relationships.