National Culture and Corporate Cash Holdings around the World
55 Pages Posted: 2 Jan 2012 Last revised: 15 May 2017
Date Written: July 19, 2014
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.
Keywords: Cash holdings; National culture; Individualism; Uncertainty avoidance
JEL Classification: G12, G14, G15
Suggested Citation: Suggested Citation