The Effects of Cultural Values on Bank Failures Around the World
60 Pages Posted: 25 Aug 2017 Last revised: 12 Nov 2018
Date Written: November 2018
We conduct the first international study of national cultural values as bank failure determinants. Ours is also the broadest-based bank failure study using bank-level data, covering 92 countries over 2000-2014. 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 capital and liquidity, and less often bail them out. Findings are robust to instrumental variables, alternative econometric techniques, different failure and culture measures, additional controls, and excluding different nations. Policy implications differ for nations with different cultures.
Keywords: Banking, Failure, Culture, Individualism, Masculinity, Risk
JEL Classification: G18, G21, G28, Z1
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