Culture’s influences: An investigation of inter-country differences in capital structure

Ciarán Mac an Bhaird and Brian Lucey

Borsa Istanbul Review, 2014, vol. 14, issue 1, 1-9

Abstract: Employing firm-level observations from 13 countries over a seven year period, and controlling for an extensive set of firm-level characteristics, industry effects and country-level institutional variables, we provide a conceptual framework and empirical analysis of how culture influences capital structure in small and medium sized enterprises (SMEs). Uncertainty avoidance and individuality are negatively related with long-term debt, highlighting SME owners desire to avoid heightened business risk, reduce interference from debt providers, and maintain autonomy and independence. Negative relationships between power distance and debt suggest a more consultative role with financial institutions, facilitating greater access to debt. Policy makers should take account of the powerful consequences of cultural influences when designing and implementing financing initiatives.

Keywords: Capital structure; SME financing; Hofstede’s cultural values; Europe (search for similar items in EconPapers)
Date: 2014
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