Merchant guild culture and cash holdings: Evidence from China

Using Chinese A-share listed firms from 2003 to 2021, we investigate the impact of merchant guild culture (MGC) on corporate cash holdings. Our results show that firms with stronger MGC influence exhibit lower levels of cash reserves. Cross-sectional analysis reveals that this effect is weaker for f...

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Bibliographic Details
Published in:International review of financial analysis 2024-07, Vol.94, p.103304, Article 103304
Main Authors: Wang, Xiaoyu, Long, Zhineng, Zhao, Xiangfang
Format: Article
Language:English
Subjects:
Cash holdings
China
Merchant guild culture
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Summary:Using Chinese A-share listed firms from 2003 to 2021, we investigate the impact of merchant guild culture (MGC) on corporate cash holdings. Our results show that firms with stronger MGC influence exhibit lower levels of cash reserves. Cross-sectional analysis reveals that this effect is weaker for firms with greater foreign cultural influence, greater economic policy uncertainty, and higher levels of industry competition. The mechanism analysis reveals that MGC affects cash holdings by increasing risk preferences and mitigating agency conflicts. We also find that MGC can increase the value of cash holdings. Overall, our findings shed light on the economic consequences of MGC from the perspective of cash holdings. •We investigate the impact of merchant guild culture (MGC) on corporate cash holdings.•Firms with stronger MGC influence exhibit lower levels of cash reserves.•This effect is weaker when foreign cultural influence, economic policy uncertainty, or industry competition are greater.•MGC affects cash holdings by increasing risk preferences and mitigating agency conflicts.
ISSN:1057-5219
1873-8079
DOI:10.1016/j.irfa.2024.103304