The Effect of Uncertainty Perception in Linguistic Features on Corporate Investment and Liquidity: Evidence From European Micro and Small Enterprises

Abstract

Language shapes the speaker’s mind. This study initiatively employs a stable linguistic feature of future tense, inflectional morphology for future tense (IF), to measure the intensity of uncertainty perception, and explores the effect of uncertainty perception on a country’s entrepreneurial propensity. We argue that individuals who use inflectional morphology for future tense perceive uncertainty intensely. Therefore, their resident countries and regions experience fewer new ventures created, namely less prosperous entrepreneurial activities. By using the country-level data in 137 countries from 2010 to 2018 (and region-level in three countries where different official languages are spoken in regions), our empirical evidence supported the propositions. The finding implies that the linguistic feature of future tense can serve as an informal institutional factor of an individual’s perception of uncertainty and contribute to the heterogeneity of nationwide and regional entrepreneurial propensity. The results present after controlling for a number of macro socio-economic and entrepreneurial ecosystem variables.