National culture and corporate cash holdings around the world

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review

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Author(s)

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

Detail(s)

Original languageEnglish
Pages (from-to)1-18
Journal / PublicationJournal of Banking and Finance
Volume50
Online published13 Oct 2014
Publication statusPublished - Jan 2015
Externally publishedYes

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.

Research Area(s)

  • Cash holdings, National culture, Individualism, Uncertainty avoidance

Citation Format(s)

National culture and corporate cash holdings around the world. / Chen, Yangyang; Dou, Paul Y.; Rhee, S. Ghon; Truong, Cameron ; Veeraraghavan, Madhu.

In: Journal of Banking and Finance, Vol. 50, 01.2015, p. 1-18.

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review