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Journal of Banking & Finance Vol. 50 2015

National culture and corporate cash holdings around the world

Yangyang Chen1,2; Paul Y. Dou3; S. Ghon Rhee4; Cameron Truong2,1; Madhu Veeraraghavan5

1 Monash University · 2 Australian Regenerative Medicine Institute · 3 Macquarie University · 4 University of Hawaii–West Oahu · 5 T A Pai Management Institute

open access

Abstract

This paper examines whether cultural dimensions explain the variation in corporate cash holdings around the world as well as within the United States. We establish four major findings. First, in an international setting, corporate cash holdings are negatively associated with individualism and positively associated with uncertainty-avoidance. Second, individualism and uncertainty avoidance influence the precautionary motive for holding cash. Third, firms in individualistic states in the United States hold less cash than firms in collectivistic states. Fourth, we show that individualism is positively related to the firm’s capital expenditures, acquisitions, and repurchases while uncertainty avoidance is negatively related. Our findings remain unchanged after controlling for governance factors, firm attributes, and country characteristics.

DOI
10.1016/j.jbankfin.2014.09.018
Volume
50
Pages
1-18
Language
en
Sources
openalex crossref bibtex:phds-export.bib

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