National culture and corporate cash holdings around the world

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 positi...

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Bibliographic Details
Published inJournal of banking & finance Vol. 50; pp. 1 - 18
Main Authors Chen, Yangyang, Dou, Paul Y., Rhee, S. Ghon, Truong, Cameron, Veeraraghavan, Madhu
Format Journal Article
LanguageEnglish
Published Amsterdam Elsevier B.V 01.01.2015
Elsevier Sequoia S.A
Subjects
Acquisitions
Capital expenditure
Capital expenditures
Cash holdings
Cash management
Cultural differences
Governance
Individualism
International
Motivation
National culture
Securities buybacks
Studies
U.S.A
Uncertainty
Uncertainty avoidance
Individualism
G12
G15
Uncertainty avoidance
G14
Cash holdings
National culture
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Summary: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.
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ISSN:0378-4266
1872-6372
DOI:10.1016/j.jbankfin.2014.09.018