Confucian culture and corporate default risk: Assessing the governance influence of traditional culture

Abstract

Given the prevalence of debt default incidents, this study investigates the influence of Confucian culture on corporate default risk in China. The results underscore Confucian culture's governance impact on corporate default risk. Channel analysis reveals that Confucian culture mitigates the risk of debt default by raising cash holdings and fostering a trustworthy business environment. Furthermore, the legal environment is found to positively moderate the impact of Confucian culture on debt default risk, whereas foreign cultural shocks and local corruption exert a negative influence. These findings not only enrich the literature on mitigating corporate default risk and promoting economic growth but also emphasize the enduring significance of China's revered traditional culture.