Creative culture, risk‐taking, and corporate financial decisions

• Published in: European financial management : the journal of the European Financial Management Association Vol. 25; no. 3; pp. 684 - 717
• Main Author: Ucar, Erdem
• Format: Journal Article
• Language: English
• Published: Oxford Blackwell Publishing Ltd 01-06-2019
• Subjects: Brainstorming; cash holdings; Companies; corporate risk‐taking; creative culture; Creativity; Culture; local factors; Risk behavior; Robustness
• ISSN: 1354-7798; 1468-036X
• DOI: 10.1111/eufm.12198

I examine how creative culture affects corporate financial decisions. Firms have corporate risk‐taking behavior and policies consistent with variations in local risk‐taking propensity induced by creative culture. Firms located in areas with a strong creative culture have higher levels of risk exposure, investment, and growth. These firms also accumulate more cash consistent with the precautionary motive. My findings remain robust after controlling for endogeneity and a series of robustness checks. The empirical findings are consistent with the risk‐taking tendency associated with creativity and creative culture. This paper introduces the role of creative culture and risk‐taking in corporate financial decisions.