How Does Culture Influence Corporate Risk-Taking?
2012
767 citations recorded by the source corpus.
We investigate the role of national culture in corporate risk-taking. We postulate that culture influences corporate risk-taking both through its effect on managerial decision-making and through its effect on a country's formal institutions. Further, we postulate that the influence of culture is conditioned on the extent of managerial discretion as measured by earnings discretion and firm size. Using firm-level data from 35 countries and employing a hierarchical linear modeling approach to isolate the effects of firm-level and country-level variables, we show that individualism has a positive and significant association, whereas uncertainty avoidance and harmony have negative and significant associations, with corporate risk-taking. Greater earnings discretion strengthens and larger firm size weakens the association of culture with corporate risk-taking. We conclude that even in a highly globalized world with sophisticated managers, culture matters.
Subfields: Accounting
View Paper: https://www.semanticscholar.org/paper/0b7530bf5f56e5ef66cf42c8a941f47e0d084a6a
Citations in the corpus
- Effects of culture on firm risk-taking: a cross-country and cross-industry analysis (2012, unknown): “Moreover, this paper extends the analyses of Griffin et al. (2012) and Kanagaretnam et al.”
- Political Uncertainty and Cost Stickiness: Evidence from National Elections around the World (2020, unknown): “Formal institutions and culture have been shown to work both independently and complementarily in determining financial and accounting decisions (e.g., Hope, 2003; Li et al., 2013).”
- Collectivism and corruption in bank lending (2013, unknown): “To address this concern, we follow Li et al. (2012) and center every independent variable by its grand mean, which is the mean averaged across firms within each country and then across countries.”
- National culture and corporate investment (2013, unknown): “…is a rationale that may integrate previous findings on individualism and different facets of corporate finance, including capital structure (Chui et al., 2002), dividend policy (Shao et al., 2010), earnings management (Han et al., 2010), and operating performance volatility (Li et al., 2012).”