The Impact Of Cultural Diversity On The Level Of Corporate Cash Holdings

Since the financial crisis broke out in 2008,companies around the world have deeply realized the necessity of keeping a moderate amount of cash on hand,and corporate decision makers have gradually realized that cash holdings is not only corporate financial resource,but also a management tool for enterprises to control risks and maintain stable and healthy operation.The concept of "cash is king" is widely pursued.However,excessive cash reserves will lead to higher opportunity costs for enterprises,resulting in inefficient capital allocation,which is not conducive to the realization of profit goals.Therefore,it is of great significance to explore the motives of "high cash holdings" and what are the influencing factors of corporate cash holdings.At present,most of the academic research on corporate cash holdings focuses on the motivation of cash holdings,the impact of internal governance structure,financial characteristics,managers’ personal characteristics,external macroeconomic environment and institutional environment on corporate cash holdings,etc.There are loopholes in insufficient research on the impact of "cultural".In recent years,strategic slogans such as "building a culturally strong country","strengthening cultural confidence",and "enhancing cultural soft power" have fully demonstrated that the central leadership of our country attaches great importance to the factor of culture.At the same time,the research perspective of the integration of sociology and finance has set off a wave of heat in the academic world.Economic and financial research is undergoing innovation."Research on the relationship between culture and corporate finance" has been favored by more and more scholars at home and abroad.Therefore,this paper attempts to examine and explore its impact on the level of corporate cash holdings from the special perspective of cultural diversity,and attempts to clarify the impact path and mechanism,so as to make up for the deficiency of "cultural" impact research on corporate cash holdings.And obtain enlightenment through empirical research,and provide targeted policy recommendations.This paper firstly carried out the basic regression of cultural diversity and the level of corporate cash holdings,and then carried out the sub-sample regression according to the differences in the nature of corporate property rights and population inflows and outflows.After that,used the terrain relief as an instrumental variable to solve the endogeneity problem.Moreover,in order to obtain more convincing results,a robustness test was also carried out.Finally,the multiplication term of the social trust and cultural diversity index of mandarin regions,northern and southern cities,and provinces was incorporated into the regression equation to test the specific mechanism.The empirical results show that: firstly,there is a significant positive correlation between cultural diversity and the level of corporate cash holdings;secondly,compared with foreign-funded enterprises and state-owned enterprises,cultural diversity has a more significant effect on the increase of cash holdings of private enterprises;thirdly,compared with regions with net population outflow,the effect of cultural diversity on the level of corporate cash holdings in areas with net population inflow is more obvious;fourthly,cultural diversity has a positive effect on corporate cash holdings,which is mainly the result of the combined effect of the communication effect and the cultural identity effect.Based on this,this paper puts forward the following suggestions for the two main subjects of micro-enterprise management decision-makers and macro-economic managers.Firstly,as micro-actors,enterprise management decision-makers should broaden their scope of attention,not only to pay attention to the formal system’s impact on corporate cash holdings,and more attention should be paid to the impact of informal systems such as trust formed by cultural identity on the level of corporate cash holdings.Secondly,the government departments as macroeconomic managers must consciously transform the informal system of culture into a powerful means to maintain the stable development of macroeconomics and give full play to the role of culture in regulating and restricting the healthy operation of society and economy.Maximizing the vitality of economic and financial development in the new era.