Role of Culture in Finance - 1973 Words

The role of Culture in Finance Newly developed methods of communication transformed the world into highly integrated place, where new global standards and collaborative corporate systems were established. Increased importance to participate in financial and economic transactions had made it relevant for all countries to use such financial theories as Capital structure, Net Present value, and Dividend policy, Leverage and Taxes. However, each country’s unique political and legal structure, cultural ideology and economic circumstances influence the extent to which these theories are used and determine a particular approach for their implementation. In this paper I will critically discuss the role of culture in finance by examining†¦show more content†¦Ã¢â‚¬Å"Low uncertainty avoidance ranking indicates that the country is less concerned about ambiguity and the future, and has more tolerance for a variety of opinions. This is reflected in a society that welcomes rule b reaking, more readily accepts change, and takes more and greater risks† (Ramirez Kwok, 2009, p. 5) On the other hand, â€Å"a high uncertainty avoidance culture creates a rule-oriented society that institutes laws, rules, regulations, and controls to reduce the amount of stress that uncertainty creates in individuals† (Ramirez Kwok, 2009, p. 5). As a result, in high uncertainty avoidance countries such as Portugal, Belgium and Poland corporations would be less willing to take risks and will see debt as an additional risk of bankruptcy (Ramirez Kwok, 2009). These corporations will prefer low debt and will try to avoid risky investments. However, corporations in countries like Singapore, Denmark and Hong Kong would be more likely to make unusual and risky investments in order to gain higher returns, and would be more comfortable financing their capital with debt by seeing in it opportunities rather than risks. Overall, both individualism and uncertainty avoidance have negative impact on debt financing and risk taking. High individualist and high uncertainty avoidance cultures would be less willing to take risky options and will try to reduce risk and uncertainty by lowering their debtShow MoreRelatedThe Role Of Finance Departments For Training Future Ceos807 Words   |  4 PagesFinance Departments for Training Future CEOs In light of involvement with the department of finance, a CFO presents a conceivably effective CEO for tending to the requirements of the corporation. CFOs perform focal roles in organizations. In any case, these roles are centered predominantly on the finance related viewpoint. The duties of the finance section areto make choices on the activities to be executed within the corporation. 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