Languages and corporate savings behavior

Shimin Chen (First Author), Henrik Cronqvist (Participant Author), Xu Ni (Participant Author), Frank Zhang (Participant Author)

Research output: Contribution to journalJournal

44 Citations (Web of Science)


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 languageEnglish
Pages (from-to)320-341
JournalJournal of Corporate Finance
Publication statusPublished - 2017

Corresponding author email


  • Corporate savings behavior
  • Linguistic hypothesis

Indexed by

  • ABDC-A*
  • Scopus
  • SSCI


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