From words to finances: Unraveling the negative net debt-languages nexus

Marvelous Kadzima, Michael Machokoto and Tesfaye T. Lemma

Finance Research Letters, 2024, vol. 66, issue C

Abstract: Using an international dataset, we find that firms in countries with languages that lack a clear distinction between present and future tenses, leading to weaker future time references, are more likely to adopt negative net debt. This conservative and non-standard financing policy is notably pronounced among financially constrained firms, those with weaker governance, and those operating in highly competitive industries. Interestingly, this increase in negative net debt with weak-FTR is higher in countries with more established institutions, financial systems, and legal frameworks, which typically exhibit a lower prevalence of financial conservatism and a weaker influence of informal institutions on corporate decisions.

Keywords: Negative net debt; Languages; Institutions; Emerging markets (search for similar items in EconPapers)
JEL-codes: G30 M40 M41 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:66:y:2024:i:c:s1544612324006950

DOI: 10.1016/j.frl.2024.105665

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