The impact of cultural clusters on capital structure decisions: Evidence from European retailers.

Capital structure is a highly controversial topic in the financial arena. Beside firm-specific determinants, research has also shown that country-specific determinants are able to explain certain variations in capital structures among different firms. In fact, national culture is a country-specific determinant, whose impact on capital structure has not yet been studied that extensively by academic literature as compared to other determinants. Therefore, it is the aim of this paper to examine the impact of cultural clusters on the capital structure decisions made by European retailers. In the analysis it is tested, using an OLS Regression, whether a firm's membership in a certain cultural cluster has a significant impact on its leverage ratio. The paper finds, even after controlling for other firm- and country-specific determinants, a significant difference between the mean capital structures of the different cultural clusters. Hence, it is concluded that culture indeed has an influence on the capital structure choices of firms.