In this paper we investigate the relation between trade credit provision and national culture as captured by Hofstede's four cultural dimensions (collectivism/individualism, power distance, uncertainty avoidance, and masculinity/femininity). Consistent with our predictions based on several theories of trade credit, we find that after controlling for firm- and country-level factors as well as industry effects, trade credit provision is higher in countries with higher collectivism, power distance, uncertainty avoidance, and masculinity scores. These results are robust to using alternative measures of culture and trade credit, alternative sample compositions, and alternative estimation methods, as well as to addressing potential endogeneity concerns. International trade openness, however, mitigates the relation between trade credit provision and our proxies for national culture.

Using a large sample of firms from developed and developing countries over the 1990–2010 period, we document evidence of zero-leverage firms around the world. Further, we find strong and robust evidence that in countries with high scores on Schwartz’s Conservatism and Mastery indices as well as high levels of trust, firms are more likely to employ a zero-leverage policy, after controlling for various firm- and country-level determinants of leverage. Finally, we find that firms with zero leverage have a lower cost of equity capital in countries where a zero-leverage policy is more compatible with the local culture.

We provide the first international evidence on the impact of economic policy uncertainty (EPU) on dividend policy. Using data from 19 countries, we find that a high level of EPU is positively associated with dividend payout. This evidence is robust to using alternative dividend payout measures, to controlling for other sources of uncertainty, and to addressing endogeneity. We further find that the effect of EPU on dividend policy is moderated by firms' free cash flows and governance quality, and by the quality of country-level indicators of shareholder protection, disclosure, enforcement, and creditor protection. Collectively, our novel evidence suggests that dividends help mitigate agency problems during high-EPU periods.

We study the impact of board reforms implemented in 40 countries worldwide on corporate dividend policy. Using a difference-in-differences analysis, we find that firms pay higher dividends following the reforms. The increase in dividend payouts is more pronounced for firms with weak board governance in the pre-reform period and those in countries with strong external governance mechanisms. Our findings corroborate the dividend outcome model, which postulates that board reforms strengthen the monitoring role of the board and empower outside shareholders to force management to disgorge dividends.

We investigate the influence of national culture on corporate debt maturity choice. Based on the framework of Williamson, we argue that culture located in social embeddedness level can shape contracting environments by serving as an informal constraint that affects human actors’ incentives and choices in market exchange. We therefore expect national culture to be related to debt maturity structure after controlling for legal, political, financial, and economic institutions. Using Hofstede’s four cultural dimensions (uncertainty avoidance, collectivism, power distance, and masculinity) as proxies for culture, and using a sample of 114,723 firm-years from 40 countries over the 1991–2006 period, we find robust evidence that firms located in countries with high uncertainty avoidance, high collectivism, high power distance, and high masculinity tend to use more short-term debt. We interpret our results as consistent with the view that national culture helps explain cross-country variations in the maturity structure of corporate debt.