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

See all articles by Allen N. Berger

Allen N. Berger

University of South Carolina - Darla Moore School of Business; Wharton Financial Institutions Center; European Banking Center

Xinming Li

University of South Carolina, Darla Moore School of Business, Department of Finance

Charles Morris

Federal Reserve Bank of Kansas City

Raluca A. Roman

Federal Reserve Bank of Philadelphia

Date Written: November 4, 2019

Abstract

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

Berger, Allen N. and Li, Xinming and Morris, Charles and Roman, Raluca A., The Effects of Cultural Values on Bank Failures Around the World (November 4, 2019). Journal of Financial and Quantitative Analysis (JFQA), Forthcoming, Available at SSRN: https://ssrn.com/abstract=3023442 or http://dx.doi.org/10.2139/ssrn.3023442

Allen N. Berger (Contact Author)

University of South Carolina - Darla Moore School of Business ( email )

1705 College St
Francis M. Hipp Building
Columbia, SC 29208
United States
803-576-8440 (Phone)
803-777-6876 (Fax)

Wharton Financial Institutions Center

Philadelphia, PA 19104-6367
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European Banking Center

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Xinming Li

University of South Carolina, Darla Moore School of Business, Department of Finance ( email )

1014 Greene Street
Columbia, SC 29208
United States

Charles Morris

Federal Reserve Bank of Kansas City

1 Memorial Drive
Kansas City, MO 64198
United States

Raluca A. Roman

Federal Reserve Bank of Philadelphia ( email )

Ten Independence Mall
Philadelphia, PA 19106-1574
United States

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