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

University of Miami - Department of Finance

Serene Xu Ni

China Europe International Business School (CEIBS)

Feida Zhang

University of Queensland

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)

University of Miami - Department of Finance ( email )

5250 University Drive
314-E Jenkins Building
Coral Gables, FL 33146
United States
(305) 284-9482 (Phone)

HOME PAGE: http://sites.google.com/site/henrikcronqvist/

Serene Xu Ni

China Europe International Business School (CEIBS) ( email )

Shanghai-Hongfeng Road
Shanghai 201206
Shanghai 201206
China

Feida Zhang

University of Queensland ( email )

St Lucia
Brisbane, Queensland 4072
Australia

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