Does foreign culture affect corporate cash holdings?

Abstract

This study analyzes the impact of foreign culture on corporate cash holdings using a sample of Chinese listed companies from 2002 to 2022. The results reveal that firms exposed to Western cultural values tend to maintain higher levels of cash holdings, driven by increased investment in innovation, and high dividend payout ratios. Furthermore, our findings indicate that the size and leverage of a firm diminish the positive impact of Western culture on cash holdings, with this positive influence being more pronounced in highly competitive industries and firms deeply influenced by Confucian culture. To test this hypothesis, we employed different proxy variables for Western culture to ensure the robustness of the results. Overall, the study offers valuable insights into the economic implications of Western cultural influence in East Asia from the perspective of cash holdings.