Does national culture influence malfeasance in banks around the world?

Thomas Conlon, Xing Huan and Cal B. Muckley

Journal of International Financial Markets, Institutions and Money, 2024, vol. 90, issue C

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 two-stage 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 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:90:y:2024:i:c:s1042443123001567

DOI: 10.1016/j.intfin.2023.101888

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