TY - JOUR
T1 - Languages and corporate savings behavior
AU - Chen, Shimin
AU - Cronqvist, Henrik
AU - Ni, Serene
AU - Zhang, Frank
N1 - Funding Information:
We are thankful for the comments from the seminar participants at Accounting & Finance Association of Australia and New Zealand, China Europe International Business School, China International Conference in Finance, Fudan University, Global Finance Conference, Massey University, Shanghai University of Finance and Economics, Stockholm School of Economics, University of Auckland, University of Miami, Vietnam International Finance Conference, and Xi'an Jiaotong-Liverpool University, and Ren?e Adams, Nick Barberis, Bo Becker, Henk Berkman, Chen Chen, Stefanos Delikouras, David Denis, Yuan Ding, Anand Goel, Jarrad Harford, Danling Jiang, Kathy Kahle, George Korniotis, Alok Kumar, Andy Leone, Feng Li, Kai Li, Florencio L?pez-de-Silanes, Timothy Lu, Yadong Luo, Ben Marshall, Mili Mormann, Michael Naylor, Mattias Nilsson, Thomas Post, Amit Seru, Paolo Sodini, Per Str?mberg, Anh Tran, Mitch Warachka, Bin Xu, Frank Yu, Xiaoyun Yu, and Tim Zhu. We are thankful to Keith Chen for sharing his language structure data. We also thank James Kent, Miranda Sun, and Nancy Yao for their excellent research assistance. We thank Standard & Poor's China and Hong Kong teams for their help with various data issues. We acknowledge the generous research funding from China Europe International Business School, and appreciate the financial support from the National Natural Science Foundation of China (approval number: 71332004, 71672165, 71202091).
PY - 2017/10
Y1 - 2017/10
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
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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 -