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Language structure and corporate financing: The role of future time reference

Author

Listed:
  • Machokoto, Michael
  • Lemma, Tesfaye T.
  • Kadzima, Marvelous

Abstract

This paper investigates how linguistic structures, specifically the strength of future time reference (FTR) in languages, affect corporate financing decisions. Using a panel of firms from 48 countries over the period 1981—2019, we show that firms in strong-FTR language environments are more likely to rely on debt financing and tend to issue debt with longer maturities than those in weak-FTR countries. These results are robust to a range of controls and falsification tests. We further demonstrate that FTR-strength moderates firms’ financing responses to major institutional and macroeconomic shifts, including the Global Financial Crisis, the adoption of International Financial Reporting Standards (IFRS), and mandatory corporate board reforms. Finally, we find that FTR-strength influences the relationship between financing choices and firm value. Overall, our findings position FTR-strength as a salient distinct informal institutional factor that shapes corporate financial behavior beyond traditional economic and legal determinants.

Suggested Citation

  • Machokoto, Michael & Lemma, Tesfaye T. & Kadzima, Marvelous, 2025. "Language structure and corporate financing: The role of future time reference," International Review of Financial Analysis, Elsevier, vol. 105(C).
    • Handle: RePEc:eee:finana:v:105:y:2025:i:c:s105752192500479x
    DOI: 10.1016/j.irfa.2025.104392
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    JEL classification:

    • M40 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - General
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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