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Eurasian Business Review
Erschienen in: Eurasian Business Review 1/2019

17.03.2018 | Regular Article

How does national culture affect corporate risk-taking?

verfasst von: José María Díez-Esteban, Jorge Bento Farinha, Conrado Diego García-Gómez

Erschienen in: Eurasian Business Review | Ausgabe 1/2019

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Abstract

The aim of this paper is to analyse the effects of national culture and formal institutions on corporate risk-taking. By applying panel data techniques for a sample of large quoted firms from 35 countries over the period of 2007–2014, we document that national culture proxied by Hofstede’s dimensions (power distance, masculinity, individualism, uncertainty avoidance and long-term orientation) influence corporate risk-taking. We also observe that the characteristics and quality of formal institutions in a country can create an environment that promotes risk-taking when corruption perception and financial freedom levels are high. Finally, cultural heterogeneity among shareholders matters for corporate risk-taking, what may help to implement better corporate governance practises. Our research contributes to the existing literature providing further evidence on the direct and indirect effects of national culture on corporate decision-making.
Vorheriger Artikel Productivity, technological innovations and broadband connectivity: firm-level evidence for ten European countries
Nächster Artikel Product success implications of distant innovative knowledge

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Fußnoten
1
Following Li et al. (2013), Kwok and Tadesse (2006) and Licht et al. (2005), we argue that these formal institutions are shaped by national culture values.
 
2
Agency relations between different types of shareholders can be more significant than the separation between ownership and control (Bennedsen and Nielsen 2010; Konjin et al. 2011; Ruiz and Santana 2011).
 
3
From an agency perspective, type II issues refer to the possible conflict of interest between major and minority shareholders, in companies where ownership structure is highly concentrated (Díez-Esteban et al. 2013).
 
4
Karolyi (2016) reports over 92,000 citations of Hofstede’s work on these cultural dimensions from the Financial Times’ 45 journals (according to the Web of Knowledge) over the period 1980–2015, and Aggarwal et al. (2016) note that Hofstede’s work is the earliest and most widely cited among databases on national culture.
 
5
Although the analysis of the monitoring role of other reference shareholders is not one of our study focus, we have included a variable (MONITOR) in the empirical model to test the existence of that role in our sample.
 
6
Obviously, the influence of other reference shareholders in the decisions of the main shareholder will be conditioned by the power of the latter or, in other words, by their level of participation in the property. This issue has already been analyzed by Konishi and Yasuda (2004).
 
7
We calculate the shareholder returns through the formula Ri = (Pt − Pi)/Pi, Pt being the share price at the end of the day and Pi the initial price. If a share was not listed on any given day, we exclude the data from that day to calculate risk.
 
8
We consider reference shareholder that owner who owns more than 5% of the capital, as this will allow him to influence the board of directors, appoint managers and intervene in key strategic decisions. Some databases such as Thomson Financial, Marketguide and WorldVest also make use of this ratio to identify the reference shareholders.
 
9
This index measures the effectiveness of the monitoring role: PP5 = (P2 + P3 + P4 + P5)/P1, being Pi the proportion of shares owned by each of the first five reference shareholders
 
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Metadaten
Titel
How does national culture affect corporate risk-taking?
verfasst von
José María Díez-Esteban
Jorge Bento Farinha
Conrado Diego García-Gómez
Publikationsdatum
17.03.2018
Verlag
Springer International Publishing
Erschienen in
Eurasian Business Review / Ausgabe 1/2019
Print ISSN: 1309-4297
Elektronische ISSN: 2147-4281
DOI
https://doi.org/10.1007/s40821-018-0105-0

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