National Culture and the Valuation of Cash Holdings

35 Pages Posted: 27 May 2020

See all articles by Svetlana Orlova

Svetlana Orlova

University of Tulsa - College of Business Administration

Ramesh P. Rao

Oklahoma State University - Stillwater - Spears School of Business - Department of Finance

Tony Kang

University of Nebraska - Lincoln

Date Written: January/February 2017

Abstract

Prior studies document that national culture traits are systematically related to cash holdings and attribute this to managerial cultural predispositions. However, it is possible that these preferences reflect investors’ cultural preferences and that managers are simply catering to investors’ preferences. It is also not clear whether the cash holding effects previously documented are value maximizing. By examining the impact of national culture traits on cash valuation, we are able to provide insight into these questions. Specifically, we examine the effect of three national culture traits – individualism, uncertainty avoidance and long‐term orientation – on firm cash valuation. Our results suggest that the previously observed effects of cultural traits on cash holdings and attributed to managerial cultural biases do not reflect investors’ preferences and are not value maximizing.

Keywords: cash holdings, national culture, valuation

Suggested Citation

Orlova, Svetlana and Rao, Ramesh P. and Kang, Tony, National Culture and the Valuation of Cash Holdings (January/February 2017). Journal of Business Finance & Accounting, Vol. 44, Issue 1-2, pp. 236-270, 2017, Available at SSRN: https://ssrn.com/abstract=3604465 or http://dx.doi.org/10.1111/jbfa.12233

Svetlana Orlova (Contact Author)

University of Tulsa - College of Business Administration ( email )

Tulsa, OK 74104
United States

Ramesh P. Rao

Oklahoma State University - Stillwater - Spears School of Business - Department of Finance ( email )

Spears School of Business
Stillwater, OK 74078-4011
United States
405-744-1385 (Phone)
405-744-5180 (Fax)

Tony Kang

University of Nebraska - Lincoln ( email )

307 College of Business Administration
Lincoln, NE 68588-0488
United States

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