Cultural Pessimism and Corporate Cash Holdings

Based on the prevalence of negative words associated with themes such as death, disease, and violence across various languages, we construct a novel country-level index of cultural pessimism. Using this index, we identify a positive association between the prevalence of negative narratives in the language of a chief financial officer’s ancestral country and their firm’s cash holdings. This association is particularly pronounced for firms facing high levels of financial constraints, cash flow volatility, or product market competition and is also stronger during financial crises. Overall, our findings support the hypothesis that culturally determined traits can significantly affect executive decision-making processes.