Abstract
Using data on Chinese firms from 2004 to 2019, this study reveals a positive association between alcohol culture and corporate risk-taking. The positive relationship is robust across different measures of risk-taking, estimation methods, and after considering potential sample selection and endogeneity issues. Two mechanisms emerge behind this positive relationship: social networks and trustful social environments; these mediating variables explain corporate risk-taking well. In addition, stronger formal institutions (market development, government efficiency, and the legal environment) and religion weaken the positive effects of alcohol culture on risk-taking. Meanwhile, these positive effects are positively moderated by collectivism and language diversity. Finally, influenced by alcohol culture, CEOs play an essential role in risk-taking.
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