Does National Culture Influence Malfeasance in Banks Around the World?

58 Pages Posted: 18 Aug 2023 Last revised: 6 Jan 2024

See all articles by Thomas Conlon

Thomas Conlon

University College Dublin

Xing Huan

EDHEC Business School

Cal B. Muckley

University College Dublin

Date Written: November 16, 2023

Abstract

We examine the extent to which national culture influences the severity of financial misconduct by banks globally. Using cultural background information of the country where a bank is headquartered, we detail strong evidence that individual over-confidence increases bank misconduct while uncertainty avoidance reduces it. The findings hold with alternative national culture and loss measures, using instrumental variable twostage least squares, excluding Anglo-Saxon countries, for US sanctions only and, for individual over-confidence, across states within the US. Regulatory capital stringency and supervisory independence can help to counter the influence of individual over-confidence on such losses. The findings outlined are relevant to regulators, policymakers, and banking practitioners seeking to mitigate malfeasance in financial institutions.

Keywords: National culture, Financial institutions, Misconduct risk

Suggested Citation

Conlon, Thomas and Huan, Xing and Muckley, Cal B., Does National Culture Influence Malfeasance in Banks Around the World? (November 16, 2023). Journal of International Financial Markets, Institutions and Money, Available at SSRN: https://ssrn.com/abstract=4545089 or http://dx.doi.org/10.2139/ssrn.4545089

Thomas Conlon

University College Dublin ( email )

Smurfit Graduate Business School
Blackrock
Co. Dublin, n/a
Ireland

HOME PAGE: http://www.ucd.ie/bankingfinance/staff/drthomasconlon/

Xing Huan

EDHEC Business School ( email )

393 Promenade des Anglais
Nice, Provence-Alpes-Côte d'Azu 06202
France

Cal B. Muckley (Contact Author)

University College Dublin ( email )

Blackrock, Co. Dublin
Ireland
+353-1-716-8091 (Phone)

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