National culture and firm investment efficiency: international evidence

Abstract

This paper examines the impact of national culture on firm investment efficiency using data of listed companies from 18 countries. We measure culture using Hofstede’s four cultural dimensions: power distance, uncertainty avoidance, individualism, and masculinity. We follow extant literature to measure firm investment efficiency. Our results indicate that individualism is positively correlated with firm investment bias and that uncertainty avoidance and masculinity are negatively correlated with firm investment bias. In addition, the influence of national culture on firm investment efficiency was more pronounced during the global financial crisis of 2008. Our results show that national cultures have significant influence on firm investment efficiency. This paper enriches the literature on the relationship between national culture and firm investment and has important implications for the investment decisions of firms.