TY - JOUR
T1 - Languages and corporate savings behavior
AU - Chen, Shimin
AU - Cronqvist, Henrik
AU - Ni, Xu
AU - Zhang, Frank
PY - 2017
Y1 - 2017
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
KW - Corporate savings behavior
KW - Linguistic hypothesis
UR - https://www.webofscience.com/api/gateway?GWVersion=2&SrcApp=ceibs_wosapi&SrcAuth=WosAPI&KeyUT=WOS:000413284700018&DestLinkType=FullRecord&DestApp=WOS
U2 - 10.1016/j.jcorpfin.2017.07.009
DO - 10.1016/j.jcorpfin.2017.07.009
M3 - Journal
SN - 0929-1199
VL - 46
SP - 320
EP - 341
JO - Journal of Corporate Finance
JF - Journal of Corporate Finance
ER -