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Effects of culture on firm risk-taking: a cross-country and cross-industry analysis

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  • Roxana Mihet

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Abstract

This paper investigates the effects of national culture on firm risk-taking, using a comprehensive dataset covering 50,000 firms in 400 industries in 51 countries. Risk-taking is found to be higher for domestic firms in countries with low uncertainty aversion, low tolerance for hierarchical relationships, and high individualism. Domestic firms in such countries tend to take substantially more risk in industries which are more informationally opaque (e.g., finance, mining, oil refinery, IT). Risk-taking by foreign firms is best explained by the cultural norms of their country of origin. These results hold even after controlling for legal constraints, insurance safety nets, and economic development. Copyright Springer Science+Business Media New York 2013

Suggested Citation

  • Roxana Mihet, 2013. "Effects of culture on firm risk-taking: a cross-country and cross-industry analysis," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 37(1), pages 109-151, February.
  • Handle: RePEc:kap:jculte:v:37:y:2013:i:1:p:109-151
    DOI: 10.1007/s10824-012-9186-2
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    Cited by:

    1. Huang, Ying Sophie & Wang, Chia-Jane, 2015. "Corporate governance and risk-taking of Chinese firms: The role of board size," International Review of Economics & Finance, Elsevier, vol. 37(C), pages 96-113.
    2. Boubakri, Narjess & Saffar, Walid, 2016. "Culture and externally financed firm growth," Journal of Corporate Finance, Elsevier, vol. 41(C), pages 502-520.
    3. Ashraf, Badar Nadeem & Zheng, Changjun & Arshad, Sidra, 2016. "Effects of national culture on bank risk-taking behavior," Research in International Business and Finance, Elsevier, vol. 37(C), pages 309-326.
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    6. Bachmann, Jan-Thomas & Engelen, Andreas & Schwens, Christian, 2016. "Toward a Better Understanding of the Association Between Strategic Planning and Entrepreneurial Orientation — The Moderating Role of National Culture," Journal of International Management, Elsevier, vol. 22(4), pages 297-315.
    7. repec:eee:riibaf:v:41:y:2017:i:c:p:318-335 is not listed on IDEAS
    8. repec:eee:rujoec:v:1:y:2015:i:3:p:294-312 is not listed on IDEAS
    9. Dominika Langenmayr & Rebecca Lester, 2013. "Taxation and corporate risk-taking," Working Papers 1316, Oxford University Centre for Business Taxation.
    10. repec:eee:jbfina:v:89:y:2018:i:c:p:169-191 is not listed on IDEAS
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    13. repec:eee:iburev:v:26:y:2017:i:6:p:1023-1033 is not listed on IDEAS
    14. repec:wsi:ijimxx:v:21:y:2017:i:01:n:s136391961730001x is not listed on IDEAS
    15. Alina Matis & Cosmin Matis, 2014. "The Dual Control – A Requirement Of The Current Bank Management," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 5, pages 71-75, October.
    16. repec:dau:papers:123456789/13772 is not listed on IDEAS
    17. Paul, Justin & Shrivatava, Archana, 2016. "Do young managers in a developing country have stronger entrepreneurial intentions? Theory and debate," International Business Review, Elsevier, vol. 25(6), pages 1197-1210.
    18. Farooq, Omar & Amin, Ayah, 2017. "National culture, information environment, and sensitivity of investment to stock prices: Evidence from emerging markets," Research in International Business and Finance, Elsevier, vol. 39(PA), pages 41-46.
    19. Lewellyn, Krista B. & Bao, Shuji ‘Rosey’, 2015. "R&D Investment in the Global Paper Products Industry: A Behavioral Theory of the Firm and National Culture Perspective," Journal of International Management, Elsevier, vol. 21(1), pages 1-17.
    20. Power, Michael & Ashby, Simon & Palermo, Tommaso, 2013. "Risk culture in financial organisations: a research report," LSE Research Online Documents on Economics 67978, London School of Economics and Political Science, LSE Library.

    More about this item

    Keywords

    National culture; Corporate risk-taking; Industry opacity; G32; G34; L20; N20; M14; D8;

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
    • N20 - Economic History - - Financial Markets and Institutions - - - General, International, or Comparative
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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