Uncertainty avoidance culture, cash holdings and financial crisis
ISSN: 1525-383X
Article publication date: 15 June 2020
Issue publication date: 21 October 2020
Abstract
Purpose
This paper aims to investigate how the global financial crisis affects the relationship between uncertainty avoidance culture and corporate cash holdings.
Design/methodology/approach
This study develops a research model in which cash holdings ratio is a function of post-crisis period dummy, Hofstede’s cultural dimension of uncertainty avoidance, their interactive term and control variables. The research sample includes 188,264 observations from 26,509 firms incorporated in 44 countries between 2003 and 2016.
Findings
This study finds that the effect of uncertainty avoidance culture on firm cash holdings is stronger in the post-crisis period from 2008 to 2016. This effect is stronger for financially constrained firms. In addition, the research findings show that uncertainty avoidance culture is more effective in cash–cash flow sensitivity over the post-crisis period.
Originality/value
Prior studies show that uncertainty avoidance culture positively affects corporate cash reserves. However, the authors only examine the effect of uncertainty avoidance culture on cash holdings in a static environment. This paper investigates this effect under the impact of the global financial crisis – an exogenous shock.
Keywords
Citation
Tran, Q.T. (2020), "Uncertainty avoidance culture, cash holdings and financial crisis", Multinational Business Review, Vol. 28 No. 4, pp. 549-566. https://doi.org/10.1108/MBR-09-2019-0117
Publisher
:Emerald Publishing Limited
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