Title: Cultural heterogeneity and risk taking of multinational firms

Abstract:

In this paper, we examine whether cultural differences are associated with the operational risks of multinational firms. Research shows that multinational operations give rise to higher risk premiums (Fillat et al., 2015; Fillat and Garetto, 2015). We argue that cultural diversity stemmed from geographical operations contributes to this increased risk. We find that cultural diversity is associated with both operational uncertainty regarding cash flows and informational uncertainties concerning cash flow estimation. The results provide support for Fillat et al. (2015) and Fillat and Garetto (2015) and suggest that investors demand higher returns from multinational firms that operate in culturally unfamiliar countries.

Biography:

John Fan Zhang obtained his PhD degree in 2018 from Auckland University of Technology with a thesis title, “The financial impact of cultural diversity on multinational firms”. In this thesis, Doctor Zhang investigates the influence of national cultural diversity on multinational entrepreneurs (MNEs). Culture is a significant influencing factor on the financial aspects of MNEs. It not only indirectly affects MNEs through formal institutions such as legal and political frameworks, but also directly governs the daily routine of MNEs through individual values, norms, and preferences. Nowadays, MNEs play an increasingly large and important role in the economic development of global markets. MNEs dynamically establish operations in different countries and economies, where national cultures may vary from one another. In this case, MNEs need to develop management and financial practices for each subsidiary in accordance with the national culture in which the subsidiary is operating, this would unavoidably influence financial decisions, performance, and value of the MNEs. Understanding the effect of cultural diversity on a firm is not only important to academic researchers but also matters to managers and investors. Doctor John Fan Zhang has also been a CFA chartholder since 2012.