Impact of National Culture on Capital Structure: Evidence From Three Emerging Economies
Author: Umar Farooq

The effect of national culture is often ignored by managers but literature shows that it has prominent role in different business decisions. So, this study try to resolve this ambiguity and attempts to investigate the impact of national culture on capital structure decision by utilizing the ten years data ranging from 2007 to 2016. The research size consists of top fifty companies each from three emerging economies i.e. Pakistan, India and China. Hofstede, s six cultural dimensions use as independent variables and four proxies of capital structure use as dependent variables. The fixed effect model (FEM) test use to estimate the regression among variables. The results of the study show that companies in high individualistic and masculinity culture prefer more equity due to more independent and assertive behavior of efforts for management of equity. But companies in high power distance countries prefer more debt due to non-consultant behavior of managers with stockholders and also the agency problem between them. The study concluded that the alternate hypotheses H1, H2 and H5 accepted. The findings of study recommends the financing policy that the finance managers should consider the national culture variation as important determinant of capital structure. Supervisor:- Dr. Jalil Ahmad Malik

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Keywords : Capital Structure, Individualism, Masculinity, Power distance
Supervisor: Jaleel Ahmed Malik

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