Abstract
Speakers of strong future time reference (FTR) languages (e.g., English) are required to grammatically distinguish between future and present events, while speakers of weak-FTR languages (e.g., Chinese) are not. We hypothesize that speaking about the future in the present tense may result in the belief that adverse credit events are more imminent. Consistent with such a linguistic hypothesis, weak-FTR language firms are found to have higher precautionary cash holdings. We report additional supportive results from changes in the relative importance of different languages in a country's business domain, evidence from within one country with several distinct languages, and results related to changes following a severe financial crisis. Our evidence introduces a new explanation for heterogeneity in corporate savings behavior, provides insights about belief formation in firms, and adds to research on the effects of languages on economic outcomes.
| Original language | English (US) |
|---|---|
| Pages (from-to) | 320-341 |
| Number of pages | 22 |
| Journal | Journal of Corporate Finance |
| Volume | 46 |
| DOIs | |
| State | Published - Oct 1 2017 |
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Keywords
- Corporate savings behavior
- Linguistic hypothesis
ASJC Scopus subject areas
- Business and International Management
- Finance
- Economics and Econometrics
- Strategy and Management
Cite this
Languages and corporate savings behavior. / Chen, Shimin; Cronqvist, Henrik; Ni, Serene; Zhang, Frank.
In: Journal of Corporate Finance, Vol. 46, 01.10.2017, p. 320-341.Research output: Contribution to journal › Article
}
TY - JOUR
T1 - Languages and corporate savings behavior
AU - Chen, Shimin
AU - Cronqvist, Henrik
AU - Ni, Serene
AU - Zhang, Frank
PY - 2017/10/1
Y1 - 2017/10/1
N2 - Speakers of strong future time reference (FTR) languages (e.g., English) are required to grammatically distinguish between future and present events, while speakers of weak-FTR languages (e.g., Chinese) are not. We hypothesize that speaking about the future in the present tense may result in the belief that adverse credit events are more imminent. Consistent with such a linguistic hypothesis, weak-FTR language firms are found to have higher precautionary cash holdings. We report additional supportive results from changes in the relative importance of different languages in a country's business domain, evidence from within one country with several distinct languages, and results related to changes following a severe financial crisis. Our evidence introduces a new explanation for heterogeneity in corporate savings behavior, provides insights about belief formation in firms, and adds to research on the effects of languages on economic outcomes.
AB - Speakers of strong future time reference (FTR) languages (e.g., English) are required to grammatically distinguish between future and present events, while speakers of weak-FTR languages (e.g., Chinese) are not. We hypothesize that speaking about the future in the present tense may result in the belief that adverse credit events are more imminent. Consistent with such a linguistic hypothesis, weak-FTR language firms are found to have higher precautionary cash holdings. We report additional supportive results from changes in the relative importance of different languages in a country's business domain, evidence from within one country with several distinct languages, and results related to changes following a severe financial crisis. Our evidence introduces a new explanation for heterogeneity in corporate savings behavior, provides insights about belief formation in firms, and adds to research on the effects of languages on economic outcomes.
KW - Corporate savings behavior
KW - Linguistic hypothesis
UR - http://www.scopus.com/inward/record.url?scp=85028346009&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=85028346009&partnerID=8YFLogxK
U2 - 10.1016/j.jcorpfin.2017.07.009
DO - 10.1016/j.jcorpfin.2017.07.009
M3 - Article
AN - SCOPUS:85028346009
VL - 46
SP - 320
EP - 341
JO - Journal of Corporate Finance
JF - Journal of Corporate Finance
SN - 0929-1199
ER -