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Does national culture influence malfeasance in banks around the world?

Author

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  • Conlon, Thomas
  • Huan, Xing
  • Muckley, Cal B.

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.

Suggested Citation

  • Conlon, Thomas & Huan, Xing & Muckley, Cal B., 2024. "Does national culture influence malfeasance in banks around the world?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 90(C).
    • Handle: RePEc:eee:intfin:v:90:y:2024:i:c:s1042443123001567
    DOI: 10.1016/j.intfin.2023.101888
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