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Egalitarianism and International Investment

Jordan I. Siegel

University of Michigan

Amir N. Licht

Interdisciplinary Center (IDC) Herzliyah - Radzyner School of Law; European Corporate Governance Institute (ECGI)

Shalom H. Schwartz

Hebrew University of Jerusalem - Department of Psychology; National Research University Higher School of Economics (Moscow)

November 4, 2010

This study identifies how country differences on a key cultural dimension - egalitarianism - influence the direction of different types of international investment flows. A society's cultural orientation towards egalitarianism is manifested by intolerance for abuses of market and political power and a desire for protecting the weak and less powerful actors. We show egalitarianism to be based on exogenous factors including social fractionalization, dominant religion circa 1900, and war experience from the 19th century era of state formation. Controlling for a large set of competing explanations, we find a robust influence of egalitarianism distance on cross-national investment flows of bond and equity issuances, syndicated loans, and mergers and acquisitions. An informal cultural institution largely determined a century or more ago, egalitarianism exercises its effect on international investment via an associated set of consistent contemporary policy choices. But even after controlling for these associated policy choices, egalitarianism continues to exercise a direct effect on cross-border investment flows, likely through its direct influence on managers’ daily business conduct.

Number of Pages in PDF File: 41

Keywords: culture, informal institutions, social institutions, egalitarianism, cultural distance

JEL Classification: F21, F23, G32, G34, K22, K4, Z13

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Date posted: May 1, 2006 ; Last revised: November 10, 2010

Suggested Citation

Siegel, Jordan I. and Licht, Amir N. and Schwartz, Shalom H., Egalitarianism and International Investment (November 4, 2010). Available at SSRN: http://ssrn.com/abstract=899082 or http://dx.doi.org/10.2139/ssrn.899082

Contact Information

Jordan I. Siegel (Contact Author)
University of Michigan ( email )
Ann Arbor, MI
United States
Amir N. Licht
Interdisciplinary Center (IDC) Herzliyah - Radzyner School of Law ( email )
P.O. Box 167
Herzliya, 46150
972-9-952-7332 (Phone)
952-9-9513323 (Fax)
European Corporate Governance Institute (ECGI)
B-1050 Brussels
952-9-9513323 (Fax)
HOME PAGE: http:/www.ecgi.org
Shalom H. Schwartz
Hebrew University of Jerusalem - Department of Psychology ( email )
National Research University Higher School of Economics (Moscow) ( email )
Myasnitskaya street, 20
Moscow, Moscow 119017

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References:  114
Citations:  21

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