Cultural Preferences and Firm Financing Choices

Forthcoming in Journal of Financial and Quantitative Analysis

61 Pages Posted: 3 Jun 2017 Last revised: 2 Feb 2019

See all articles by Mascia Bedendo

Mascia Bedendo

University of Bologna - Department of Management

Emilia Garcia-Appendini

University of Zurich - Department of Banking and Finance

Linus Siming

Free University of Bozen-Bolzano - Faculty of Economics and Management

Multiple version iconThere are 2 versions of this paper

Date Written: September 18, 2018

Abstract

We document significant differences in the financing structure of small firms with managers of diverse cultural backgrounds. To isolate the effect of culture, we exploit cultural heterogeneity within a geographical area with shared regulations, institutions, and macroeconomic cycles. Our findings suggest that there exist significant cultural differences in the preference towards debt funding and in the use of formal and informal sources of financing (bank loans and trade credit). Our results are robust to alternative explanations based on potential differences in credit constraints and in the distribution of cultural origins across industries, trading partners, and headquarters location.

Keywords: Managerial cultural origin; Small firm financing; Trade credit

JEL Classification: Z10, G32, M14

Suggested Citation

Bedendo, Mascia and Garcia-Appendini, Emilia and Siming, Linus, Cultural Preferences and Firm Financing Choices (September 18, 2018). Forthcoming in Journal of Financial and Quantitative Analysis, Available at SSRN: https://ssrn.com/abstract=2979247 or http://dx.doi.org/10.2139/ssrn.2979247

Mascia Bedendo

University of Bologna - Department of Management ( email )

Via Capo di Lucca 34
Bologna, Bologna 40126
Italy

Emilia Garcia-Appendini (Contact Author)

University of Zurich - Department of Banking and Finance ( email )

Schönberggasse 1
Zürich, 8001
Switzerland

Linus Siming

Free University of Bozen-Bolzano - Faculty of Economics and Management ( email )

Via Sernesi 1
39100 Bozen-Bolzano (BZ), Bozen 39100
Italy

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