The power of cultural governance: The red prescription for corporate excess leverage

Mingrui Zhang and Danni Zheng

Finance Research Letters, 2025, vol. 73, issue C

Abstract: This paper introduces the perspective of red culture to examine its governance effect on corporate excess leverage. We robustly find that red culture significantly curbs corporate excess leverage. The primary mechanisms are the enhancement of corporate social responsibility and the strengthening of organizational discipline. Furthermore, the effect is more pronounced in state-owned enterprises and firms located in regions with a higher degree of openness. We provide a new perspective on the role of cultural governance in corporate financial management and offers practical guidance for both corporate management and policy-making.

Keywords: Red culture; Excess leverage; Cultural Governance (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:73:y:2025:i:c:s1544612324016556

DOI: 10.1016/j.frl.2024.106626

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