Managers’ Cultural Origin and Corporate Response to an Economic Shock

56 Pages Posted: 3 Feb 2022 Last revised: 4 Apr 2023

See all articles by Mascia Bedendo

Mascia Bedendo

University of Bologna - Department of Management

Emilia Garcia-Appendini

Norges Bank; University of Zurich - Department Finance

Linus Siming

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

Date Written: October 24, 2022

Abstract

We exploit the exogenous Covid-19 shock in a bicultural area of Italy to identify cultural differences in the way companies respond to economic shocks. Firms with managers of diverse cultural backgrounds resort to different forms of government aid, diverge in their investment decisions, and have different growth rates. These findings are consistent with cultural differences in time preferences and debt aversion. Specifically, we find that the response of managers belonging to a more long-term oriented culture is characterized by a lower recourse to debt, more investments and higher growth rates. Overall, our results show that the cultural origin of managers significantly affects firms’ reaction to economic shocks and real economic outcomes.

Keywords: Corporate financing; Corporate investment; Culture; Covid-19

JEL Classification: G32, G33, M14, Z10

Suggested Citation

Bedendo, Mascia and Garcia-Appendini, Emilia and Siming, Linus, Managers’ Cultural Origin and Corporate Response to an Economic Shock (October 24, 2022). Journal of Corporate Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=4023943 or http://dx.doi.org/10.2139/ssrn.4023943

Mascia Bedendo

University of Bologna - Department of Management ( email )

Via Capo di Lucca 34
Bologna, Bologna 40126
Italy

Emilia Garcia-Appendini (Contact Author)

Norges Bank ( email )

P.O. Box 1179
Oslo, N-0107
Norway

University of Zurich - Department 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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