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The power of cultural governance: The red prescription for corporate excess leverage

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  • Zhang, Mingrui
  • Zheng, Danni

Abstract

This paper introduces the perspective of red culture to examine its governance effect on corporate excess leverage. We robustly find that red culture significantly curbs corporate excess leverage. The primary mechanisms are the enhancement of corporate social responsibility and the strengthening of organizational discipline. Furthermore, the effect is more pronounced in state-owned enterprises and firms located in regions with a higher degree of openness. We provide a new perspective on the role of cultural governance in corporate financial management and offers practical guidance for both corporate management and policy-making.

Suggested Citation

  • Zhang, Mingrui & Zheng, Danni, 2025. "The power of cultural governance: The red prescription for corporate excess leverage," Finance Research Letters, Elsevier, vol. 73(C).
    • Handle: RePEc:eee:finlet:v:73:y:2025:i:c:s1544612324016556
    DOI: 10.1016/j.frl.2024.106626
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    References listed on IDEAS

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