 Collectivism and the costs of high leverageSadok El Ghoul, Omrane Guedhami, Chuck C.Y. Kwok and Ying Zheng Journal of Banking & Finance, 2019, vol. 106, issue C, 227-245 Abstract: Prior literature shows that high leverage is associated with losses in market share due to unfavorable actions by customers and competitors. Building on this literature, we investigate the effect of collectivism on the product market performance of highly leveraged firms. Using a sample of 46 countries over the 1989–2016 period, we find significantly lower costs of high leverage for countries with higher collectivism scores. Moreover, we find that the impact of collectivism on high leverage costs is more pronounced for firms with high product specialization and with financially healthy rivals. In additional analysis, we find that collectivism helps highly leveraged firms retain employees and obtain trade credit from suppliers. Our findings thus suggest that a country's culture affects corporate financial outcomes by influencing the actions of firm stakeholders. Keywords: Collectivism; National culture; Costs of high leverage; Stakeholder theory; Predation theory (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:106:y:2019:i:c:p:227-245 DOI: 10.1016/j.jbankfin.2019.06.004 Access Statistics for this article Journal of Banking & Finance is currently edited by Ike Mathur More articles in Journal of Banking & Finance from Elsevier |
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