National Culture as a Determinant of Corporate Capital Structure: Empirical Evidence from Three Emerging Economies


  • Yi Zhou Internal Audit Department, Bank of Jiangsu, China Author
  • Jiapeng Dai University of Wollongong, KDU University College, Malaysia Corresponding Author
  • Umar Farooq School of Economics and Finance, Xi’an Jiaotong University, P. R. China Author
  • Jaleel Ahmed Department of Accounting and Finance, Capital University of Science and Technology (CUST), Pakistan Author
  • Klunko Natalia Sergeevna Department of Philosophy, Head of Training of Scientific and Scientific-Pedagogical Personnel Department, Russian New University, Moscow, Russian Federation Author



Individualism, Masculinity, Power Distance, Capital Structure, Emerging Economies


Purpose: Psychological perceptions of corporate managers are deeply inherent in their cultural background. Such an influential state of corporate managers can create versatilities regarding the different firm-level decisions. Given that, this study aims to quantify the dynamical role of national culture in determining corporate financing patterns i.e., debt and equity financing.

Design/methodology/approach: The sample size includes the top 100 non-financial sector firms each from Pakistan, India, and China over the period 2007 to 2016. Hofstede’s six cultural dimensions were considered proxy variables of national culture. The capital structure decision was quantified through two proxy variables named debt financing and equity financing. The regression among variables was established by utilizing the fixed effect model.

Findings: The analysis reveals that individualism and masculinity have a negative while power distance shows a positive and statistically significant relationship with debt financing. Corporate managers with individualistic and masculine cultural backgrounds are less interested in debt financing due to more effort exerting behavior to manage the equity stock. However, managers from a high-power distance culture are more likely to acquire debt financing as they do not assume to adhere to shareholders. In brief, the findings of the study illustrate the significant role of national culture in firm-level decisions i.e., financing decisions.

Practical implications: Practically, the findings of the study can help managers design an efficient financing policy in the context of different cultural backgrounds.

Social implications: Socially, as cultural diversity has a significant role in managing financing, therefore it is recommended to consider the cultural background of corporate managers in their recruitment.

Novelty: This study provides new insights regarding the significant role of culture in firm financing decisions specifically in emerging economies. This study is most relevant to decision sciences studies as it explores the role of the cultural background of corporate managers in deciding financing preferences.

Author Biographies

  • Jaleel Ahmed, Department of Accounting and Finance, Capital University of Science and Technology (CUST), Pakistan

    Department of Accounting and Finance, Capital University of Science and Technology (CUST), Pakistan

  • Klunko Natalia Sergeevna, Department of Philosophy, Head of Training of Scientific and Scientific-Pedagogical Personnel Department, Russian New University, Moscow, Russian Federation

    Department of Philosophy, Head of Training of Scientific and Scientific-Pedagogical Personnel Department, Russian New University, Moscow, Russian Federation


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How to Cite

Zhou, Y., Dai, J., Farooq, U., Ahmed, J., & Sergeevna, K. N. (2023). National Culture as a Determinant of Corporate Capital Structure: Empirical Evidence from Three Emerging Economies. Advances in Decision Sciences, 27(2), 122-144.