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Managers' cultural origin and corporate response to an economic shock


Bedendo, Mascia; Garcia-Appendini, Emilia; Siming, Linus (2023). Managers' cultural origin and corporate response to an economic shock. Journal of Corporate Finance, 80:102412.

Abstract

We exploit the exogenous Covid-19 shock in a bicultural area of Italy to identify cultural differences in the way companies respond to economic shocks. Firms with managers of diverse cultural backgrounds resort to different forms of government aid, diverge in their investment decisions, and have different growth rates. These findings are consistent with cultural differences in time preferences and debt aversion. Specifically, we find that the response of managers belonging to a more long-term oriented culture is characterized by a lower recourse to debt, more investments and higher growth rates. Overall, our results show that the cultural origin of managers significantly affects firms' reaction to economic shocks and real economic outcomes.

Abstract

We exploit the exogenous Covid-19 shock in a bicultural area of Italy to identify cultural differences in the way companies respond to economic shocks. Firms with managers of diverse cultural backgrounds resort to different forms of government aid, diverge in their investment decisions, and have different growth rates. These findings are consistent with cultural differences in time preferences and debt aversion. Specifically, we find that the response of managers belonging to a more long-term oriented culture is characterized by a lower recourse to debt, more investments and higher growth rates. Overall, our results show that the cultural origin of managers significantly affects firms' reaction to economic shocks and real economic outcomes.

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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Banking and Finance
Dewey Decimal Classification:330 Economics
Scopus Subject Areas:Social Sciences & Humanities > Business and International Management
Social Sciences & Humanities > Finance
Social Sciences & Humanities > Economics and Econometrics
Social Sciences & Humanities > Strategy and Management
Uncontrolled Keywords:Corporate financing, Corporate investment, Culture, Covid-19
Scope:Discipline-based scholarship (basic research)
Language:English
Date:1 June 2023
Deposited On:09 Jan 2024 13:40
Last Modified:30 Jun 2024 01:36
Publisher:Elsevier
ISSN:0929-1199
OA Status:Hybrid
Free access at:Publisher DOI. An embargo period may apply.
Publisher DOI:https://doi.org/10.1016/j.jcorpfin.2023.102412
Other Identification Number:merlin-id:24235
  • Content: Published Version
  • Language: English
  • Licence: Creative Commons: Attribution 4.0 International (CC BY 4.0)