National Culture and Bank Deposits

Review of Corporate Finance, Forthcoming

53 Pages Posted: 16 Jul 2019 Last revised: 21 Dec 2020

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: December 15, 2020

Abstract

This paper investigates the relation between national culture and bank deposits. Using annual data (1995-2015) for 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 for both domestic and global banks, reinforcing the view that banking is largely based on trust. Results are robust to empirical specifications alleviating endogeneity concerns, thus suggesting a causal effect. Motivated by recent regulatory changes emphasizing the importance of liquidity (deposit) stability, we further analyse the impact of annual bank-level deposit stability on the trust-deposits relation. We show that high deposit volatility is associated with a decrease in the positive effect that trust has on deposit levels.

Keywords: deposits, national culture, trust, individualism, hierarchy, risk

JEL Classification: G01, G21, Z13

Suggested Citation

Mourouzidou Damtsa, Stella and Milidonis, Andreas and Stathopoulos, Konstantinos, National Culture and Bank Deposits (December 15, 2020). Review of Corporate Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3420069 or http://dx.doi.org/10.2139/ssrn.3420069

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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