Research Article

DOI :10.26650/JECS2023-1304400 IUP :10.26650/JECS2023-1304400 Full Text (PDF)

A New Era of Capital Structure Choices in Technology Firms: Insights on Cultural Dimensions

Filiz Bozagaç, Ömür Saltık, Mert Aktaş, Süleyman Değirmen

This study investigates the correlation between corporate financial ratios and cultural dimensions across countries in order to guide technology firms in adapting to the current financial landscape characterized by limited borrowing options and higher interest rates. Using Hofstede’s subregional continental classification, it examines the relationship betweencapital structure and value among 4,237 publicly listed technology firms in 46 countries. The study analyzes financial ratios and connects them with Hofstede’s subdimensions of individualism and uncertainty avoidance culture. The findings reveal a significant relationship between cultural dimensions and financial ratios, with individualism and uncertainty avoidance being influential factors. Countries emphasizing individuality tend to have higher borrowing rates, whereas those with a strong preference for uncertainty avoidance exhibit higher gross margins and total debt-to-equity ratios. The borrowing rate variable does not directly affect the dimensions of femininity versus masculinity and uncertainty avoidance; however, it impacts the dimension of individualism versus collectivism. Overall, this study provides valuable insights to enable technology firms to make informed decisions, manage financial structures, and effectively navigate the current financial landscape.

Keywords: Cultural dimensions, Corporate finance, Capital structure, Structural equation model, Technology sector

JEL Classification : C3 , M21 , O16

References

Agyei, J., Sun, S., & Abrokwah, E. (2020). Trade-off theory versus pecking order theory: Ghanaian evidence. Sage Open, 10(3), 1-13. https://doi.org/10.1177/2158244020940987 google scholar
Ahmad, N. S. M., & Atniesha, M. R. A. A. (2018). The pecking order theory and start-up financing of small and medium enterprises: Insight into available literature in the Libyan context. Financial Markets, Institutions and Risks, 2(4), 5-12. google scholar
Al-Zoubi, H. A., O’Sullivan, J. A., & Alwathnani, A. M. (2018). Business cycles, financial cycles and capital structure. Annals of Finance, 14(1), 105-123. google scholar
Ardalan, K. (2017). Capital structure theory: Reconsidered. Research in International Business and Finance, 39(B), 696-710. google scholar
Arosa, C., Richie, N., & Schuhmann, P. W. (2014). The impact of culture on market timing in capital structure. Research in International Business and Finance, 31(1), pp.178-192. google scholar
Baker, M., & J. Wurgler, (2002). Market timing and capital structure. Journal of Finance, 57(1), 1-32. google scholar
Banerjee, S., Heshmati, A., & Wihlborg, C. (1999). The dynamics of capital structure. New York University-Salomon Center-Leonard N. Stern School of Business, New York, NY, 6-8. google scholar
Bukalska, E. (2019). Testing trade-off theory and pecking order theory under managerial overconfidence. International Journal of Management and Economics, 55(2), 99-117. google scholar
Cheung, M. W., & Chan, W. (2009). A two-stage approach to synthesizing covariance matrices in meta-analytic structural equation modeling. Structural Equation Modeling: A Multidisciplinary Journal, 16(1), 28-53. google scholar
Chen, S. Y., & Chen, L. J. (2011). Capital structure determinants: An empirical study in Taiwan. African Journal of Business Management, 5(27), 10974-10983. google scholar
Chui, A. C. W., Kwok, C. C. Y., & Lloyd, A. E. (2002). The determination of capital structure: Is national culture a missing piece to the puzzle?. Journal of International Business Studies, 33(1), 99-127. google scholar
Cohen, J. (1988). Statistical Power Analysis for the Behavioral Sciences. Routledge Academic, New York, NY, 77-83. google scholar
De Jong, E., & Semenov, R., (2002). Cross-Country Differences in Stock Market Development: A Cultural View. “Retrieved from” SSRN: https://ssrn.com/abstract=301374 or http://dx.doi.org/10.2139/ssrn.301374. google scholar
Du, J., Wu, H., & Jin, R. (2019). Capital structure of public-private partnership projects: a sustainability perspective. Sustainability, 11(13), 3505, 1-25. google scholar
Durand, D. (1952). Costs of debt and equity funds for business: trends and problems of measurement. In Conference on research in business finance. “Retrieved from” http://www.nber.org/books/univ52-1 (accssed 20 07.2022), 215-262, January. google scholar
Durand, D. (1959). The cost of capital, corporation finance, and the theory of investment: comment. The American Economic Review, 49(4), 639-655. google scholar
Esperanca, J.P., Gama, A.P.M., & Gulamhussen, M.A., (2003). Corporate Debt Policy of Small Firms: An Empirical (Re) Examination. Journal of Small Business and Enterprise Development, 10(1), 62-80. google scholar
Frank, M. Z., & Goyal, V. K. (2003). Testing the pecking order theory of capital structure. Journal Of Financial Economics, 67(2), 217-248. google scholar
Gleason, K. C., Mathur, L. K., & Mathur, I. (2000). The interrelationship between culture, capital structure, and performance: evidence from European retailers. Journal of business research, 50(2), 185-191. google scholar
Harris, M., & Raviv, A. (1991). The theory of capital structure. The Journal of Finance, 46(1), 297-355. google scholar
Hasanuddin, R. (2021). The influence of investment decisions, dividend policy and capital structure on firm value. Jurnal Economic Resource, 4(1), 39-48. google scholar
Heinkel, R. (1982). A theory of capital structure relevance under imperfect information. The Journal of Finance, 37(5), 1141-1150. google scholar
Hofstede, G. (1980). Culture’s consequences: International differences in work related values. Sage, Beverly Hills, CA, 32-244. google scholar
Hofstede, G. (1983). The cultural relativity of organizational practices and theories. Journal of International Business Studies, 14(2), 75-89. google scholar
Hofstede, G. H., & Bond, M. H. (1988). The Confucius connection: from cultural roots to economic growth. Organizational Dynamics, 16(4), 5-21. google scholar
Hofstede, G. (1997). Cultures and organizations: Software of the mind. London: McGraw-Hill. Vol.2, 3-7, 2005. google scholar
Hofstede, G. H. (2001). Culture‘s consequences: Comparing values, behaviors, ınstitutions, and organizations across nations (2nd ed.). Sage Publication, ThoABDnd Oaks CA, 32-244. google scholar
House, R. J., Wright, N. S., & Aditya, R. N. (1997). Cross-cultural research on organizational leadership: A critical analysis and a proposed theory. In P. C. Earley & M. Erez (Eds.), New perspectives on international industrial/ organizational psychology, The New Lexington Press/Jossey-Bass Publishers, San Francisco, 535-625. google scholar
Kearney, C., Mac an Bhaird, C., & Lucey, B. M. (2012). Culture and capital structure in small and medium sized firms. “Retrieved from” SSRN: https://ssrn.com/abstract=2185284 or http://dx.doi.org/10.2139/ssrn.2185284 google scholar
Kluckhohn, C. (1962). Culture and behavior. Free Press Glencoe, New York. google scholar
Korajczyk, R. A., & Levy, A. (2003). Capital structure choice: macroeconomic conditions and financial constraints”. Journal of Financial Economics, 68(1), 75-109. google scholar
Kwok, C. C., & Tadesse, S. (2006). National culture and financial systems. Journal of International Business Studies, 37(2), 227-247. google scholar
Lucas, D. J., & McDonald, R. L. (1990). Equity issues and stock price dynamics. The Journal of Finance, 45(4), 1019-1043. google scholar
Luigi, P., & Sorin, V. (2009). “A review of the capital structure theories”. Annals of Faculty of Economics, 3(1), 315-320. google scholar
Lyandres, E. (2006). Capital structure and interaction among firms in output markets: Theory and evidence. The Journal of Business, 79(5), 2381-2421. google scholar
Myers, S. C. (1984). Capital structure puzzle. NBER Working Paper,1393, 1-35 google scholar
Myers, S. C., & Majluf, N. S. (1984). Corporate financing and investment decisions when firms have information that investors do not have. Journal of Financial Economics, 13(2), 187-221. google scholar
Modigliani, F., & Miller, M. H. (1958). The cost of capital, corporation finance and the theory of investment. The American Economic Review, 48(3), 261-297. google scholar
Papaioannou, G., & Karagozoglu, A. (2017). Underwriting services and the new issues market. Academic Press, London, United Kingdom, 129-248. google scholar
Rashid, M., Hj, D. S. N. K. P., & Izadi, S. (2020). National culture and capital structure of the Shariah compliant firms: Evidence from Malaysia, Saudi Arabia and Pakistan. International Review of Economics & Finance. “Retrieved from” https://doi.org/10.1016/j.iref.2020.10.006. 1-16. google scholar
Roberts, M. R., & Sufi, A. (2009). Control rights and capital structure: An empirical investigation. The Journal of Finance, 64(4), 1657-1695. google scholar
Schwartz, S.H., & Sagiv, L., (1995). Identifying Culture-Specifics in the Content and Structure of Values. Journal of Cross-Cultural Psychology, 26, 92-116. google scholar
Scott, J., (1976). A theory of optimal capital structure. The Bell Journal of Economics and Management Science, 7(1), 33-54. google scholar
Shahar, W. S. S. B., & Manja, S. I. (2018). Determinants of capital structure. Reports on Economics and Finance, 4(3), 139-149. google scholar
Shyam-Sunder, L., & Myers, S. C. (1999). Testing static tradeoff against pecking order models of capital structure. Journal of Financial Economics, 51(2), 219-244. google scholar
Titman, S. (1984). The effect of capital structure on a firm’s liquidation decision. Journal of Financial Economics, 13(1), 137-151. google scholar
Wang, D., & Esqueda, O. A. (2014). National culture effects on leverage decisions: Evidence from emerging-market ADRs. Research in International Business and Finance, 31(1), 152-177. google scholar
Xhaferi, S., & Xhaferi, B. (2015). Alternative theories of capital structure. European Scientific Journal, 11(7), 327-343. google scholar
Wardani, O. M., & Subowo, S. (2020). Factors That Influence Capital Structure With Profitability as A Moderating Variable. Accounting Analysis Journal, 9(2), 103-109. google scholar
Yang, G. J. A., Chueh, H., & Lee, C. H. (2014). Examining the theory of capital structure: signal factor hypothesis. Applied Economics, 46(10), 1127-1133. google scholar
Yıldırım, D., & Çelik, A. K. (2021). Testing the pecking order theory of capital structure: Evidence from Turkey using panel quantile regression approach. Borsa Istanbul Review, 21(4), 317-331. google scholar
Zheng, X., El Ghoul, S., Guedhami, O., & Kwok, C. (2012). National culture and corporate debt maturity. Journal of Banking & Finance, 36(2), 468-488. google scholar

Citations

Copy and paste a formatted citation or use one of the options to export in your chosen format

EXPORT

APA

Bozagaç, F., Saltık, Ö., Aktaş, M., & Değirmen, S. (2019). A New Era of Capital Structure Choices in Technology Firms: Insights on Cultural Dimensions. Journal of Economy Culture and Society, 0(0), -. https://doi.org/10.26650/JECS2023-1304400

AMA

Bozagaç F, Saltık Ö, Aktaş M, Değirmen S. A New Era of Capital Structure Choices in Technology Firms: Insights on Cultural Dimensions. Journal of Economy Culture and Society. 2019;0(0):-. https://doi.org/10.26650/JECS2023-1304400

ABNT

Bozagaç, F.; Saltık, Ö.; Aktaş, M.; Değirmen, S. A New Era of Capital Structure Choices in Technology Firms: Insights on Cultural Dimensions. Journal of Economy Culture and Society, [Publisher Location], v. 0, n. 0, p. -, 2019.

Chicago: Author-Date Style

Bozagaç, Filiz, and Ömür Saltık and Mert Aktaş and Süleyman Değirmen. 2019. “A New Era of Capital Structure Choices in Technology Firms: Insights on Cultural Dimensions.” Journal of Economy Culture and Society 0, no. 0: -. https://doi.org/10.26650/JECS2023-1304400

Chicago: Humanities Style

Bozagaç, Filiz, and Ömür Saltık and Mert Aktaş and Süleyman Değirmen. “A New Era of Capital Structure Choices in Technology Firms: Insights on Cultural Dimensions.” Journal of Economy Culture and Society 0, no. 0 (May. 2024): -. https://doi.org/10.26650/JECS2023-1304400

Harvard: Australian Style

Bozagaç, F & Saltık, Ö & Aktaş, M & Değirmen, S 2019, 'A New Era of Capital Structure Choices in Technology Firms: Insights on Cultural Dimensions', Journal of Economy Culture and Society, vol. 0, no. 0, pp. -, viewed 19 May. 2024, https://doi.org/10.26650/JECS2023-1304400

Harvard: Author-Date Style

Bozagaç, F. and Saltık, Ö. and Aktaş, M. and Değirmen, S. (2019) ‘A New Era of Capital Structure Choices in Technology Firms: Insights on Cultural Dimensions’, Journal of Economy Culture and Society, 0(0), pp. -. https://doi.org/10.26650/JECS2023-1304400 (19 May. 2024).

MLA

Bozagaç, Filiz, and Ömür Saltık and Mert Aktaş and Süleyman Değirmen. “A New Era of Capital Structure Choices in Technology Firms: Insights on Cultural Dimensions.” Journal of Economy Culture and Society, vol. 0, no. 0, 2019, pp. -. [Database Container], https://doi.org/10.26650/JECS2023-1304400

Vancouver

Bozagaç F, Saltık Ö, Aktaş M, Değirmen S. A New Era of Capital Structure Choices in Technology Firms: Insights on Cultural Dimensions. Journal of Economy Culture and Society [Internet]. 19 May. 2024 [cited 19 May. 2024];0(0):-. Available from: https://doi.org/10.26650/JECS2023-1304400 doi: 10.26650/JECS2023-1304400

ISNAD

Bozagaç, Filiz - Saltık, Ömür - Aktaş, Mert - Değirmen, Süleyman. “A New Era of Capital Structure Choices in Technology Firms: Insights on Cultural Dimensions”. Journal of Economy Culture and Society 0/0 (May. 2024): -. https://doi.org/10.26650/JECS2023-1304400

Issue 02019, P. -

TIMELINE

Submitted	28.05.2023
Accepted	11.11.2023
Published Online	06.05.2024

LICENCE

Attribution-NonCommercial (CC BY-NC)

This license lets others remix, tweak, and build upon your work non-commercially, and although their new works must also acknowledge you and be non-commercial, they don’t have to license their derivative works on the same terms.

Journal of Economy Culture and Society