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National culture and corporate cash holdings around the world

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  • Chen, Yangyang
  • Dou, Paul Y.
  • Rhee, S. Ghon
  • Truong, Cameron
  • Veeraraghavan, Madhu

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.

Suggested Citation

  • Chen, Yangyang & Dou, Paul Y. & Rhee, S. Ghon & Truong, Cameron & Veeraraghavan, Madhu, 2015. "National culture and corporate cash holdings around the world," Journal of Banking & Finance, Elsevier, vol. 50(C), pages 1-18.
  • Handle: RePEc:eee:jbfina:v:50:y:2015:i:c:p:1-18
    DOI: 10.1016/j.jbankfin.2014.09.018
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    Keywords

    Cash holdings; National culture; Individualism; Uncertainty avoidance;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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