National Culture and Profit Reinvestment: Evidence from Small and Medium-Sized Enterprises

Sadok El Ghoul, Omrane Guedhami, Chuck Kwok, Liang SHAO

Research output: Contribution to journalArticlepeer-review

9 Citations (Scopus)


We examine the role of national culture-an important informal institution-in the profit reinvestment decisions of small firms in emerging markets. Prior economic development literature focuses on formal institutions as determinants of growth. However, in emerging markets where formal institutions are less developed, informal institutions should have more of a direct versus indirect impact through formal institutions. We find that Schwartz's cultural dimensions of Embeddedness and Hierarchy negatively affect profit reinvestment, and that access to external financing (strength of property rights) is more important for reinvestment decisions in countries with low (high) Embeddedness and Hierarchy.

Original languageEnglish
Pages (from-to)37-65
Number of pages29
JournalFinancial Management
Issue number1
Publication statusPublished - 1 Mar 2016

Scopus Subject Areas

  • Accounting
  • Finance
  • Economics and Econometrics


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