National Culture and Bank Risk-Taking

43 Pages Posted: 23 Dec 2016 Last revised: 26 Aug 2017

See all articles by Stella Mourouzidou Damtsa

Stella Mourouzidou Damtsa

University of Manchester - Alliance Manchester Business School

Andreas Milidonis

University of Cyprus - Department of Accounting and Finance

Konstantinos Stathopoulos

The University of Manchester - Alliance Manchester Business School

Date Written: August 25, 2017

Abstract

We investigate the relation between national cultural values and bank risk. Despite the rigid transnational regulatory oversight of systemic European banks, we find evidence of an economically significant association between cultural values and domestic bank risk. Specifically, we report a positive (negative) association between the cultural values of individualism and hierarchy (trust) and domestic bank risk-taking. Consistent with our predictions, this relation weakened during the recent financial crisis and does not hold for global banks, regardless of the period under investigation. Our findings are robust to endogeneity tests that mitigate concerns regarding reverse causality and confounding effects affecting our conclusions.

Keywords: Bank Risk-Taking, National Culture, Financial Crisis, Domestic vs. Global Banks

JEL Classification: G01, G21, Z13

Suggested Citation

Mourouzidou Damtsa, Stella and Milidonis, Andreas and Stathopoulos, Konstantinos, National Culture and Bank Risk-Taking (August 25, 2017). Journal of Financial Stability, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2889277 or http://dx.doi.org/10.2139/ssrn.2889277

Stella Mourouzidou Damtsa (Contact Author)

University of Manchester - Alliance Manchester Business School ( email )

Booth Street West
Manchester, M15 6PB
United Kingdom

Andreas Milidonis

University of Cyprus - Department of Accounting and Finance ( email )

P.O. Box 20537
Nicosia CY-1678
Cyprus
+357 22 893 626 (Phone)

HOME PAGE: http://www.ucy.ac.cy/~amilidon/

Konstantinos Stathopoulos

The University of Manchester - Alliance Manchester Business School ( email )

AMBS Building
Booth Street West
Manchester, M15 6PB
United Kingdom
+44 161 275 6863 (Phone)
+44 161 275 4023 (Fax)

HOME PAGE: http://www.research.manchester.ac.uk/portal/K.Stathopoulos.html

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