The Influence Of Language Future-Time Reference On Corporate Investment

The literature has mostly studied the impact of institutions on resource allocation and economic growth from the perspective of formal institutions such as law and investor protection,while research on informal institutions such as culture is relatively scarce.In recent years,with the spread of cross-disciplinary research and applications,academics have begun to focus on the role of culture as an economic institution.Language,also as an important informal institution,influence individuals’ cognitive processes and behavioral decisions.There has been academic research by domestic and international economists on the influence of language on individual saving behavior,corporate precautionary cash holdings and corporate dividend payout policies.Based on related theories and studies,this paper empirically examines the impact of differences in language future time reference on corporate investment decisions,explores how language influences individuals’ perception of future time distance and event uncertainty when evaluating expected value,and finally affects corporate investment.Future-Time Reference(FTR)documents the different ways in which different languages express future events grammatically,and to some extent influence speakers’ perception of future time and event.Strong FTR languages require speakers to clearly distinguish and describe present and future events,whereas weak FTR languages do not.Based on this difference in language grammatical structure,this study examines the influence and mechanism of FTR on corporate investment with theoretical and empirical analysis.The conclusions are as follows:(1)Firms using weak FTR languages have lower capital expenditure compared to firms operating in strong FTR language environments.This finding remains robust after various tests of controlling for various variables,conducting the study within Belgium,and constructing a DID model based on Hong Kong handover.(2)Language can influence corporate investment by affecting individuals’ cognitive processes.Specifically,higher levels of education can improve decision makers’ ability to access information and reduce cognitive differences between individuals,thereby mitigating the cognitive effects of language and weakening the relationship between FTR and corporate investment.This paper focuses on language future time reference,studies business decisions of firms from a nontraditional economic perspective of language,innovatively proposes a new factor that influences firms’ investment behavior,and complements the extant literature about informal institutions and firms’ investment decisions.In addition,this study empirically examines the cognitive effect of language by influencing individual behavioral decisions,enriches the research on FTR at the firm level,and provides new ideas for research in the fields of language economics and corporate finance in the future.