Does Alcohol Make A Man Bolder

Alcohol culture is a long-lasting part in traditional Chinese culture.Chinese people have loved drinking for thousands of years,making alcohol culture lasting until now.We can find evidence for the relevance between heavy-drinking behavior and people’s characteristic of fearlessness from Chinese literature masterpieces,researches in modern psychology about alcohol and personality,and discussions about social problems due to drinking.When the whole society prefers alcohol drinking,it becomes a social culture rather than a personal behavior,and the boldness and the fearlessness underlying in the heavy drinking then become characteristics of this culture.These characteristics can show up in every aspect in the everyday social life.This paper uses the data of Chinese listed firms during 2008-2016,to test how the"bold" culture of drinking influences firms’ risk taking.I show the result that firms in areas which have high degree of alcohol culture will show riskier preference represented by holding higher leverage and lower cash holding,because these areas show higher degree of tolerance in risk.Then I use the instrument variable(IV)method to deal with possible endogeneity problem.This result is proved robust after changing several definitions of variables and using the IV method again.Then I find out the channel that alcohol culture raises the level of firm’s risk taking because it is more likely to make the chairman overconfident.Further,I investigate different effects of drinking culture on samples separated as(1)SOEs and non-SOEs;(2)if firm’s locating province is highly marketized;(3)if firm is heavily affected by religion;and(4)1 find that value of firms located in more-alcohol-drinking region is lower.This paper investigates the effect of traditional Chinese culture on firms’ behavior.It further fulfills the research in firm’s risk-taking,and I hope it can to some degree extend the existing research in Chinese traditional culture and finance.