Languages and dividends

Wen He, Feida Zhang

Research output: Contribution to journalArticleResearchpeer-review


We study whether languages are related to corporate dividend policies around the world. Users of languages with a weak future time reference (FTR), such as Japanese and Finnish, do not need to grammatically distinguish future and current events, while users of strong-FTR languages such as French and Italian do. Chen (2013) shows that people who use weak-FTR languages may perceive the future to be nearer and have less precise perceptions of the timing of future events than users of strong-FTR languages. We argue that these perceptions may result in a lower discount rate and a higher valuation of future dividends, leading to a weaker preference and demand for a dividend today. Using a large sample of firms from 19 markets, we find supporting evidence that firms in weak-FTR language markets pay lower dividends than firms in strong-FTR language markets. The results remain robust after a battery of robustness tests, including using a single market with multiple languages and using a difference-in-differences approach in a market with a change of official languages. Further evidence shows that weak-FTR languages are related to a lower implied cost of equity capital and stronger market reactions to dividend changes. Our results offer a new explanation for cross-country differences in dividend policies and add to the research on culture and financial markets.

Original languageEnglish
Article number101132
Number of pages21
JournalThe British Accounting Review
Issue number6
Publication statusPublished - Nov 2022


  • Corporate finance
  • Culture
  • Dividends
  • Future time reference
  • Languages

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