Confucianism culture and corporate cash holdings

Shihua Chen · Yan Ye · Khalil Jebran · Muhammad Ansar Majeed

60 citations0/0 files storedInternational Journal of Emerging Markets

No readable copy stored yet — this record is metadata only.

No open-access location is known for this record yet.

Literature note Cite in a project Citation map

Corporate Finance and Governance Political Influence and Corporate Strategies Culture, Economy, and Development Studies

Abstract

Purpose This study examines how Confucianism, as an informal system, alleviates manager–shareholder conflicts and thus decreases managerial behavior of keeping higher levels of cash reserves. This study also investigates whether formal governance mechanisms (state ownership and institutional investors) moderate the relationship between Confucianism and cash holdings. Design/methodology/approach This study opts a sample of Chinese listed firms over the period of 2004–2015. The geographical-proximity-based method was followed to measure Confucianism, which is the distance between a firm's registered address and the national Confucianism centers. Findings The results indicate that Confucianism adversely influences cash holdings. The authors’ findings illustrate that Confucian culture promotes ethical behavior, and therefore, firms in a strong Confucianism environment keep a lower level of cash reserves. The authors further document that the effect of Confucianism on cash holding is weaker for state-owned firms but stronger for firms with low institutional ownership. Practical implications The findings provide implications for policymakers, academicians, and corporations. The results suggest that culture can reduce cash holdings. Especially, in emerging markets, such as China, where formal mechanisms are relatively less effective, informal institutions can serve an alternative system for alleviating adverse effects of agency conflicts. Originality/value This study contributes to the literature in two ways. First, this study contributes to cash holdings literature by showing that culture (Confucianism) is negatively associated with cash holdings. Second, this study extends the incumbent literature that seeks to explore how Confucian culture influences corporate behavior. To the best of the authors knowledge, this is the first study that identifies that Confucianism is associated with cash holdings.

Paper brief

Loading…

Cite this work

Citation unavailable for this work.

BibTeX RIS CSL-JSON

No public copy is stored for this record, so only the metadata is cited.

Citations in this library

Citation map →

Stored only when both papers are in the corpus — 60 citations exist upstream.

References

1984Corporate financing and investment decisions when firms have information that investors do not have 1998Law and Finance 1986Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers 1996Agency costs of free cash flow, corporate finance, and takeovers 1982Moral Hazard in Teams 1999The determinants and implications of corporate cash holdings 2008Corporate Governance in Emerging Economies: A Review of the Principal–Principal Perspective 2001Dividends and Expropriation

Cited by

2023The power of culture: Does Confucian culture contribute to corporate environmental information disclosure?2021The effect of Confucian culture on household risky asset holdings: Using categorical principal component analysis 2020Social trust environment and tunneling 2023Does Confucian culture reduce corporate default risk? Evidence from China 2022Confucianism and auditor changes: evidence from China 2022Origin matters: How does institution imprint affect family business TFP?

Explore the map →

Papers that cite the same references — the relational fallback while embeddings are still backfilling.

Imported from OpenAlex (CC0) — nothing here is generated.