The Effects of Cultural Values on Bank Failures Around the World

60 Pages Posted: 25 Aug 2017 Last revised: 12 Nov 2018

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 2018

Abstract

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

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 2018). 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
United States

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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