The Effects of Cultural Values on Bank Failures Around the World
Journal of Financial and Quantitative Analysis (JFQA), Forthcoming
67 Pages Posted: 25 Aug 2017 Last revised: 8 Nov 2019
Date Written: November 4, 2019
We conduct the first broad-based international study on bank-level failures covering 92 countries over 2000-2014, investigating national culture variables as failure determinants. We find individualism and masculinity are positively associated with bank failure, but operate through different channels. Managers in individualist countries assume more portfolio risk, while governments in masculine countries allow banks to operate with less liquidity and less often bail out troubled institutions. Findings are robust to accounting for endogeneity, different techniques and measures, and additional controls. Results have implications for prudential policies, including regulation, supervision, and bailout strategies that may partially mitigate some negative effects of culture.
Keywords: Banking, Failure, Culture, Individualism, Masculinity, Risk
JEL Classification: G18, G21, G28, Z1
Suggested Citation: Suggested Citation