From words to finances : unraveling the negative net debt-languages nexus

Abstract

Using an international dataset, we find that firms in countries with languages that lack a clear distinction between present and future tenses, leading to weaker future time references, are more likely to adopt negative net debt. This conservative and non-standard financing policy is notably pronounced among financially constrained firms, those with weaker governance, and those operating in highly competitive industries. Interestingly, this increase in negative net debt with weak-FTR is higher in countries with more established institutions, financial systems, and legal frameworks, which typically exhibit a lower prevalence of financial conservatism and a weaker influence of informal institutions on corporate decisions.