The Effect of Uncertainty Perception in Linguistic Features on Corporate Investment and Liquidity

57 Pages Posted: 18 Mar 2020 Last revised: 2 Jul 2020

Date Written: February 11, 2020


This study aims to investigate the effect of uncertainty perception and future time reference on the number of enterprises around the world and on the investment decisions and the liquidity of 1,883 European micro and small enterprises (MSEs) during their first years of existence. It presents a novel proxy for owner-managers’ perception of uncertainty based on whether inflectional morphology is used to convey the future tense the language. The results of this novel proxy indicate that when language conveys the intense perception of uncertainty, there are a reduced number of enterprises created. Additionally, when MSE owner-managers speak a language with an intense perception of uncertainty there is a positive effect on MSEs’ tangibility and a negative effect on the accounts receivable (debtors) ratio and liquidity. The results present a new explanation and fresh evidence for the impact of MSE owner-managers’ characteristics on entrepreneurial activities and corporate investment decisions. The findings also provide MSE owner-managers, entrepreneurs and regulators with suggestions on how to assist early-stage MSEs. The findings are robust to the inclusion of several owner-manager characteristics, corporate-specific variables, macroeconomic factors, and Hofstede’s cultural dimensions.

Keywords: entrepreneurship, corporate investment, asset composition, uncertainty perception, linguistics, behavioural corporate finance, micro and small enterprises (MSEs)

JEL Classification: D22, D70, D92, G30, G31

Suggested Citation

Song, Bing, The Effect of Uncertainty Perception in Linguistic Features on Corporate Investment and Liquidity (February 11, 2020). Available at SSRN: or

Bing Song (Contact Author)

SKEMA Business School ( email )


Here is the Coronavirus
related research on SSRN

Paper statistics

Abstract Views
PlumX Metrics