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Confucian culture and corporate default risk: Assessing the governance influence of traditional culture

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  • Zhang, Ning
  • Bo, Lan
  • Wang, Xuanqiao

Abstract

Given the prevalence of debt default incidents, this study investigates the influence of Confucian culture on corporate default risk in China. The results underscore Confucian culture's governance impact on corporate default risk. Channel analysis reveals that Confucian culture mitigates the risk of debt default by raising cash holdings and fostering a trustworthy business environment. Furthermore, the legal environment is found to positively moderate the impact of Confucian culture on debt default risk, whereas foreign cultural shocks and local corruption exert a negative influence. These findings not only enrich the literature on mitigating corporate default risk and promoting economic growth but also emphasize the enduring significance of China's revered traditional culture.

Suggested Citation

  • Zhang, Ning & Bo, Lan & Wang, Xuanqiao, 2024. "Confucian culture and corporate default risk: Assessing the governance influence of traditional culture," International Review of Economics & Finance, Elsevier, vol. 94(C).
    • Handle: RePEc:eee:reveco:v:94:y:2024:i:c:s1059056024003708
    DOI: 10.1016/j.iref.2024.103378
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    More about this item

    Keywords

    Confucian culture; Corporate default risk; Informal institutions;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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