Religiosity and cross‐country differences in trade credit use

Abstract

Using the firm‐level data over 1989–2012 from 53 countries, we find religiosity in a country is positively associated with trade credit use by local firms. Specifically, after controlling for firm‐ and country‐level factors as well as industry and year effects, we show that trade credit use is higher in more religious countries. Moreover, both creditor rights and social trust in a country enhance the positive association between religiosity and trade credit use, while the quality of national‐level disclosure mitigates the aforementioned positive association. These results are robust to alternative measures of religiosity, alternative sampling requirements and potential endogeneity concerns.