In current finance studies, the role of culture on key corporate decisions in public firms has already been tackled and addressed at length. However, the same cannot be true of privately-held firms (i.e. unlisted in any stock exchange). This project aims to fill that void. Private ownership dominates any economy’s corporate structure both in terms of number and economic significance. Using data from the Bureau van Dijk Orbis database, Akguc, Choi and Kim (2017) showed that 98.3% of all firms in the UK and 99.2% of all firms in the US were unlisted private firms. Asker, Farre-Mensa and Ljungqvist (2015) estimated that private firms accounted for about 69% of private sector employment, 59% of sales, and 49% of aggregate pre-tax profits in the U.S. Similarly, Akguc, Choi and Kim (2016) indicated that private firms accounted for 70% of total corporate assets, 65% of total sales, and 59% of after-tax corporate profits. When the effect of national culture on key corporate decisions (e.g. investment, dividend policy, cash holdings, R&D, etc.) is studied, it becomes crucial to include private firms to avoid sample selection bias as well as to gain a more comprehensive understanding of any economy’s corporate structure. Curiously enough, current literature has only to this point focused on public firms. Arguably, private firms are more relevant in culture and finance studies than are public firms. Private firm executives are likely to be more influenced by informal institutions such as national culture than are public firm executives because private firms are closely held with much fewer shareholders and do not face the same public pressure to meet any short-term stock price targets. Managers of public firms have to go to through sometimes complicated shareholder approval processes to implement key decisions and have to keep analyst expectations for short-term price targets in mind, which can and does detract from greater looming cultural considerations. Moreover, stock markets all around the world are closely linked, which I argue leads public firm behavior in any country to be more affected by universal norms than by national culture. The studies that investigate the role of culture on key corporate decisions all use publicly-listed firms (except Akguc and Choi, 2017, who study the effect of culture on firm investment behavior using a large multi-country sample that includes both public and private firms). I argue that only using public firms in culture studies yields biased and inaccurate results.
This study and its comprehensive look at the role culture plays on key corporate decisions in both private and public firms has significant relevance not only in the US, UK and many other countries around the World, e.g., but also in Qatar. Similar to those in the US and UK, private firms in Qatar constitute the dominant firm structure both in terms of number and economic significance. The Bureau van Dijk Orbis database shows (as of September 2, 2017) that 20,727 out of a total of 20,771 firms in Qatar are privately held and only 44 firms are publicly listed on the Qatar Stock Exchange. Understanding the role of culture on firm behavior around the world will likely to offer many lessons for Qatari corporations.