How does national culture affect corporate risk-taking?

The aim of this paper is to analyse the effects of national culture and formal institutions on corporate risk-taking. By applying panel data techniques for a sample of large quoted firms from 35 countries over the period of 2007–2014, we document that national culture proxied by Hofstede’s dimensions (power distance, masculinity, individualism, uncertainty avoidance and long-term orientation) influence corporate risk-taking. We also observe that the characteristics and quality of formal institutions in a country can create an environment that promotes risk-taking when corruption perception and financial freedom levels are high. Finally, cultural heterogeneity among shareholders matters for corporate risk-taking, what may help to implement better corporate governance practises. Our research contributes to the existing literature providing further evidence on the direct and indirect effects of national culture on corporate decision-making.