Languages and Corporate Savings Behavior

47 Pages Posted: 27 Jan 2015 Last revised: 15 Jul 2017

See all articles by Shimin Chen

Shimin Chen

China Europe International Business School (CEIBS)

Henrik Cronqvist

Chapman University - The George L. Argyros College of Business and Economics

Serene Xu Ni

China Europe International Business School (CEIBS)

Feida Zhang

China Europe International Business School (CEIBS); University of Queensland - Accounting and Accountability

Date Written: July 12, 2017

Abstract

Speakers of strong future time reference (FTR) languages (e.g., English) are required to grammatically distinguish between future and present events, while speakers of weak-FTR languages (e.g., Chinese) are not. We hypothesize that speaking about the future in the present tense may result in the belief that adverse credit events are more imminent. Consistent with such a linguistic hypothesis, weak-FTR language firms are found to have higher precautionary cash holdings. We report additional supportive results from changes in the relative importance of different languages in a country's business domain, evidence from within one country with several distinct languages, and results related to changes following a severe financial crisis. Our evidence introduces a new explanation for heterogeneity in corporate savings behavior, provides insights about belief formation in firms, and adds to research on the effects of languages on economic outcomes.

Keywords: Corporate savings behavior, Linguistic hypothesis

JEL Classification: G02, G32, D83, Z13

Suggested Citation

Chen, Shimin and Cronqvist, Henrik and Ni, Serene Xu and Zhang, Feida, Languages and Corporate Savings Behavior (July 12, 2017). Available at SSRN: https://ssrn.com/abstract=2556061 or http://dx.doi.org/10.2139/ssrn.2556061

Shimin Chen

China Europe International Business School (CEIBS) ( email )

Shanghai-Hongfeng Road
Shanghai 201206
Shanghai 201206
China

Henrik Cronqvist (Contact Author)

Chapman University - The George L. Argyros College of Business and Economics ( email )

1 University Drive
Orange, CA 92866
United States

Serene Xu Ni

China Europe International Business School (CEIBS) ( email )

Shanghai-Hongfeng Road
Shanghai 201206
Shanghai 201206
China

Feida Zhang

China Europe International Business School (CEIBS) ( email )

Shanghai-Hongfeng Road
Shanghai 201206
Shanghai 201206
China

University of Queensland - Accounting and Accountability ( email )

St Lucia
Brisbane, Queensland 4072
Australia

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