National Culture and Corporate Cash Holdings around the World

55 Pages Posted: 2 Jan 2012 Last revised: 15 May 2017

See all articles by Yangyang Chen

Yangyang Chen

Hong Kong Polytechnic University - Faculty of Business

Yiwen (Paul) Dou

Macquarie University

S. Ghon Rhee

University of Hawaii - Shidler College of Business; University of Hawaii - Department of Financial Economics and Institutions

Cameron Truong

Monash University; Financial Research Network (FIRN)

Madhu Veeraraghavan

T.A. PAI Management Institute, Finance Area

Date Written: July 19, 2014

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.

Keywords: Cash holdings; National culture; Individualism; Uncertainty avoidance

JEL Classification: G12, G14, G15

Suggested Citation

Chen, Yangyang and Dou, Yiwen (Paul) and Rhee, S. Ghon and Truong, Cameron and Veeraraghavan, Madhu, National Culture and Corporate Cash Holdings around the World (July 19, 2014). Journal of Banking and Finance, Vol. 50, 2015. Available at SSRN: https://ssrn.com/abstract=1976694 or http://dx.doi.org/10.2139/ssrn.1976694

Yangyang Chen

Hong Kong Polytechnic University - Faculty of Business ( email )

9/F, Li Ka Shing Tower
The Hong Kong Polytechnic University
Hong Kong, Hung Hom, Kowloon M923
China

Yiwen (Paul) Dou

Macquarie University ( email )

North Ryde
Sydney, New South Wales 2109
Australia

S. Ghon Rhee (Contact Author)

University of Hawaii - Shidler College of Business ( email )

2404 Maile Way
C-304, FEI/CBA
Honolulu, HI 96822
United States

University of Hawaii - Department of Financial Economics and Institutions ( email )

United States

Cameron Truong

Monash University ( email )

23 Innovation Walk
Wellington Road
Clayton, Victoria 3800
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Madhu Veeraraghavan

T.A. PAI Management Institute, Finance Area ( email )

Bangalore
Manipal, Karnataka 576104
India
+91-820-2701030 (Phone)

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