Debt Financing of Foreign-funded Enterprises——Behavioral Interpretation from Cultural Viewpoint
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| Title | Debt Financing of Foreign-funded Enterprises——Behavioral Interpretation from Cultural Viewpoint
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| Author | Wang Jinmeng and Shen Zhiyu |
| Organization | School of Finance, Nanjing Audit University;Institute of Industrial Economics, Chinese Academy of Social Sciences |
| Email | jinmengwang@163.com；shen0566@vip.sina.com |
| Key Words | Foreign-funded Enterprises；Debt Financing；Cultural Difference；Power Distance Individualism |
| Abstract | Different from the traditional theory of capital structure which is mainly based on economic factors and ignores the influence of norms on debt financing, this paper investigates the impact of cultural difference between original country and China on the mechanism and the results of debt financing of Foreign-funded Enterprises(FFEs) with the data from micro level. After solving the endogenous problem that may arise from the cultural differences, we find that(1)the larger cultural difference between original country and China，the more difficultly FFEs obtain loan from domestic banks，and the fewer debt they will have．Mainly because Cultural differences increase the transaction costs，which lead to fewer availability of debt financing for FFEs. All these are caused by the differences of power distance and individualism，specifically FFEs will get fewer loans if they come from countries with low power distance or high individualism．But the bigger difference of masculinity，uncertainty avoidance and long term orientation will help FFEs to borrow money from domestic banks．(2)Longer operating period will make FFEs with bigger cultural difference obtain loan more difficultly, which is caused by the differences of power distance and individualism. (3)But with increase of cultural difference，FFEs controlled by China investors will get loan more easily than those controlled by foreign investors．Mainly because the Chinese holding reduces the negative effect of China's high power distance and enhances the positive effect of the long-term orientation on the debt financing of FFEs. The findings are not only useful to interpret ownership discrimination of debt financing in China culturally，but also provide out-going enterprises of China with reference to finance debt and control financial risk． |
| Serial Number | WP1242 |
| Time | 2017-11-30 |
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