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Journal Articles International Review of Financial Analysis Year : 2020

Culture and Capital Structure : What Else to the Puzzle?

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Vipin Mogha
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  • PersonId : 1084436
Benjamin Williams
  • Function : Author
  • PersonId : 1084437

Abstract

This paper investigates four of Hofstede's cultural dimensions-individualism, masculinity, uncertainty avoidance, and long-term orientation-influence on firms' choices of short-term and long-term capital structures. Cultures influence on corporate risk-taking may drive their debt-to-equity mix based on the higher of their equity book or market value. We empirically test culture influence with a sample of 5968 firms from five industry sectors, across 33 countries, over 2009-2017. We find firms national culture influencing their choices of short-term and long-term debt to book and market value of equity. The influence is more significant on the short-term than the long-term capital structures. Furthermore, it is more significant on the short-term debt to market value of equity and on the long-term debt to book value of equity. Our robustness checks at the firm-level, country-level and sample-level confirm and reinforce our main results. These findings would provide financial analysts, investors, and creditors an in-depth understanding when comparing international firms' capital structures.
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hal-03043112 , version 1 (07-12-2020)

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  • HAL Id : hal-03043112 , version 1

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Vipin Mogha, Benjamin Williams. Culture and Capital Structure : What Else to the Puzzle?. International Review of Financial Analysis, 2020. ⟨hal-03043112⟩
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