New Evidence on National Culture and Bank Capital Structure

Abstract

We examine the nature of impact of national culture on bank leverage using a broad sample of 1,701 banks from 79 countries, over the period 2000-2013, i.e., 18,996 bank-year observations. We find that banks in countries with high individualism culture dimensions hold more leverage while, banks in countries with high uncertainty-avoidance, power distance, and long-term orientation have less leverage. Notably, bank size substantially moderates these cultural effects. Our findings are robust to endogeneity, and alternative proxies for the dependent and core explanatory variables.

Keywords: Bank leverage; National culture; Individualism; Power distance; Uncertainty avoidance; Long-term orientation; Endogeneity

JEL Classification: G01, G21, G28, G32, G38, H63, M14