National Culture and Corporate Debt Maturity

64 Pages Posted: 11 Nov 2013

See all articles by Xiaolan Zheng

Xiaolan Zheng

Nottingham Business School China

Sadok El Ghoul

University of Alberta - Campus Saint-Jean

Omrane Guedhami

University of South Carolina - Moore School of Business

Chuck C.Y. Kwok

University of South Carolina - Darla Moore School of Business

Date Written: July 2011

Abstract

We investigate the influence of national culture on corporate debt maturity choice. Based on the framework of Williamson, we argue that culture located in social embeddedness level can shape contracting environments by serving as an informal constraint that affects human actors’ incentives and choices in market exchange. We therefore expect national culture to be related to debt maturity structure after controlling for legal, political, financial, and economic institutions. Using Hofstede’s four cultural dimensions (uncertainty avoidance, collectivism, power distance, and masculinity) as proxies for culture, and using a sample of 114,723 firm-years from 40 countries over the 1991 to 2006 period, we find robust evidence that firms located in countries with high uncertainty avoidance, high collectivism, high power distance, and high masculinity tend to use more short-term debt. We interpret our results as consistent with the view that national culture helps explain cross-country variations in the maturity structure of corporate debt.

Keywords: G32, Z10

JEL Classification: National culture, Debt maturity, Agency theory, Capital structure

Suggested Citation

Zheng, Xiaolan and El Ghoul, Sadok and Guedhami, Omrane and Kwok, Chuck C.Y., National Culture and Corporate Debt Maturity (July 2011). Journal of Banking and Finance, Vol. 36, 2012. Available at SSRN: https://ssrn.com/abstract=2352660 or http://dx.doi.org/10.2139/ssrn.2352660

Xiaolan Zheng

Nottingham Business School China ( email )

199 Taikang East Road
AB 469
ningbo, Zhejiang 315100
China

Sadok El Ghoul (Contact Author)

University of Alberta - Campus Saint-Jean ( email )

Edmonton, Alberta T6G 2R3
Canada
780-465-8725 (Phone)
780-465-8760 (Fax)

Omrane Guedhami

University of South Carolina - Moore School of Business ( email )

Columbia, SC
United States

Chuck C.Y. Kwok

University of South Carolina - Darla Moore School of Business ( email )

1705 College St
Francis M. Hipp Building
Columbia, SC 29208
United States
803-777-3606 (Phone)
803-777-3609 (Fax)

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