Journal of Corporate Finance
Speakers of strong future time reference (FTR) languages (e.g., English) are required to grammatically distinguish between future and present events, while speakers of weak-FTR languages (e.g., Chinese) are not. We hypothesize that speaking about the future in the present tense may result in the belief that adverse credit events are more imminent. Consistent with such a linguistic hypothesis, weak-FTR language firms are found to have higher precautionary cash holdings. We report additional supportive results from changes in the relative importance of different languages in a country's business domain, evidence from within one country with several distinct languages, and results related to changes following a severe financial crisis. Our evidence introduces a new explanation for heterogeneity in corporate savings behavior, provides insights about belief formation in firms, and adds to research on the effects of languages on economic outcomes.
Corporate savings behavior
Corporate executives managing some of the largest public companies in the U.S. are shaped by their daughters. When a firm’s chief executive officer (CEO) has a daughter, the corporate social responsibility rating (CSR) is about 9.1% higher, compared to a median firm. The results are robust to confronting several sources of endogeneity, e.g., examining first-born CEO daughters and CEO changes. The relation is strongest for diversity, but significant also for broader pro-social practices related to the environment and employee relations. Our study contributes to research on female socialization, heterogeneity in CSR policies, and plausibly exogenous determinants of CEOs’ styles.
Corporate social responsibility
This case tells the story of the cross-border acquisition of Volvo by a Chinese private enterprise, Geely. It describes the entrepreneurial spirit of Geely’s founder, Mr. LiShufu (李书福), his persistence in creating a car manufacturing company, and the rise of Geely as the very first private domestic company in China which had a car manufacturing license. The case also mentions that Geely completed a “backdoor listing” on the Hong Kong Stock Exchange, and its globalization process through a series of cross-border acquisitions. Then, the situation of Geely in 2009, a brief story of Volvo and Geely’s pursuit of Volvo is presented. Meanwhile, Li Shufu’s long-standing dream of being a global player in the automobile industry, and in a more macro background, Chinese companies’ efforts to catapult themselves onto the world stage through mergers and acquisitions, are brought to the attention of the readers for an in-depth analysis.
Journal of Political Economy
Analyzing the savings behavior of a large sample of identical and fraternal twins, we find that genetic differences explain about 33 percent of the variation in savings propensities across individuals. Individuals are born with a persistent genetic predisposition to a specific savings behavior. Parenting contributes to the variation in savings rates among younger individuals, but its effect decays over time. The environment when growing up (e.g., parents' wealth) moderates genetic effects. Finally, savings behavior is genetically correlated with income growth, smoking, and obesity, suggesting that the genetic component of savings behavior reflects genetic variation in time preferences or self-control.
LIFETIME PORTFOLIO SELECTION
We find that several factors explain an individual investor׳s style, i.e., the value versus growth orientation of the investor׳s stock portfolio. First, we find that an investor׳s style has a biological basis and is partially ingrained in an investor from birth. Second, we show that an investor׳s hedging demands as well as behavioral biases explain investment style. Finally, an investor׳s style is explained by life course theory in that experiences, both earlier and later in life, are related to investment style. Investors with adverse macroeconomic experiences (e.g., growing up during the Great Depression or entering the labor market during an economic recession) or who grow up in a lower socioeconomic status rearing environment have a stronger value orientation several decades later. Our research contributes a new perspective to the long-standing value and growth debate in finance.
For a long list of investment “biases,” including lack of diversification, excessive trading, and the disposition effect, we find that genetic differences explain up to 45% of the remaining variation across individual investors, after controlling for observable individual characteristics. The evidence is consistent with a view that investment biases are manifestations of innate and evolutionary ancient features of human behavior. We find that work experience with finance reduces genetic predispositions to investment biases. Finally, we find that even genetically identical investors, who grew up in the same family environment, often differ substantially in their investment behaviors due to individual-specific experiences or events.