The role of national culture in the relationship between capital structure and investment decisions of European Information Sector companies

Abstract

The paper explores the influence of national culture on the interaction between a firm’s leverage and investment, measured as Capital Expenditure, across companies in European Information Sector. Using Hofstede’s cultural indexes and based on analysis of scientific papers, investigating the influence of national culture on the investment and leverage, and effect of capital structure on investment, it was hypotheses that uncertainty avoidance and power distance have a positive moderating effect on leverage-investment relations, while individualism and masculinity affect negatively. The financial data of stock-listed companies from the information sector across European countries for the last 10 years was extracted from Amadeus database. Criteria for the company inclusion were financial data availability for the period 2008-2017 for companies across European Information Sector, and availability of a minimum of 3 companies per one country. The quantitative method was chosen for conducting the research, including univariate and regression analyses. The obtained results demonstrate that national culture affects the relationship between the company’s level of leverage and investment.