National Culture and Bank Deposits
55 Pages Posted: 16 Jul 2019 Last revised: 21 Jul 2019
Date Written: July 15, 2019
This paper investigates the relation between national culture and bank deposits. Using annual data (1995-2015) of a sample of 99 banks that participated in the 2014 stress tests of the European Banking Authority, we document relations between three national cultural traits and bank deposits. The effect of hierarchy and individualism on deposits is stronger (positive and negative, respectively) in domestic banks where culture is more homogeneous compared to global banks. On the other hand, the positive effect of trust on deposits is robust in both domestic and global banks, reinforcing the view that banking is largely based on trust. Motivated by recent regulatory changes emphasizing the importance of liquidity (deposit) stability, we further analyse the impact of annual bank-level deposit stability within countries where trust is invariant. We show that high deposit volatility decreases the positive effect of trust on deposit levels. Results are robust to endogeneity concerns, thus suggesting a causal effect, and are economically significant.
Keywords: deposits, national culture, trust, individualism, hierarchy, risk
JEL Classification: G01, G21, Z13
Suggested Citation: Suggested Citation