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Egalitarianism and international investment

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  • Siegel, Jordan I.
  • Licht, Amir N.
  • Schwartz, Shalom H.

Abstract

This study identifies how country differences on a key cultural dimension—egalitarianism—influence international investment flows. A society's cultural orientation toward egalitarianism is manifested by intolerance for abuses of market and political power and a desire for protecting less powerful actors. We show egalitarianism to be based on exogenous factors including social fractionalization, dominant religion circa 1900, and war experience from the 19th century. We find a robust influence of egalitarianism distance on cross-national flows of bond and equity issuances, syndicated loans, and mergers and acquisitions. An informal cultural institution largely determined a century or more ago, egalitarianism exercises its effect on international investment via an associated set of consistent contemporary policy choices. But even after controlling for these associated policy choices, egalitarianism continues to exercise a direct effect on cross-border investment flows, likely through its direct influence on managers' daily business conduct.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Financial Economics.

Volume (Year): 102 (2011)
Issue (Month): 3 ()
Pages: 621-642

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Handle: RePEc:eee:jfinec:v:102:y:2011:i:3:p:621-642

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Web page: http://www.elsevier.com/locate/inca/505576

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Keywords: Culture; Informal institutions; Social institutions; Egalitarianism; Cultural distance; International investment; Cross-listing; Foreign direct investment; Mergers and acquisitions;

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References

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  2. Stephen Haber & Enrico Perotti, 2008. "The Political Economy of Financial Systems," Tinbergen Institute Discussion Papers 08-045/2, Tinbergen Institute.
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  4. Nicholas Bloom & Christos Genakos & Raffaella Sadun & John Van Reenen, 2011. "Management Practices Across Firms and Countries," CEP Discussion Papers dp1109, Centre for Economic Performance, LSE.
  5. Durand, Robert B. & Koh, SzeKee & Tan, Paul LiJian, 2013. "The price of sin in the Pacific-Basin," Pacific-Basin Finance Journal, Elsevier, vol. 21(1), pages 899-913.
  6. Claessens, Stijn & Yurtoglu, B. Burcin, 2013. "Corporate governance in emerging markets: A survey," Emerging Markets Review, Elsevier, vol. 15(C), pages 1-33.
  7. Breuer, Janice Boucher & McDermott, John, 2013. "Respect, responsibility, and development," Journal of Development Economics, Elsevier, vol. 105(C), pages 36-47.
  8. Frijns, Bart & Gilbert, Aaron & Lehnert, Thorsten & Tourani-Rad, Alireza, 2013. "Uncertainty avoidance, risk tolerance and corporate takeover decisions," Journal of Banking & Finance, Elsevier, vol. 37(7), pages 2457-2471.
  9. Erkan Gören, 2013. "Economic Effects of Domestic and Neighbouring Countries' Cultural Diversity," ZenTra Working Papers in Transnational Studies 16 / 2013, ZenTra - Center for Transnational Studies, revised Apr 2013.
  10. Bohdan Kukharskyy, 2012. "Global Sourcing if Contracts are Reference Points," Working Papers 129, Bavarian Graduate Program in Economics (BGPE).
  11. Enrico Perotti, 2013. "The Political Economy of Finance," Tinbergen Institute Discussion Papers 13-034/IV/DSF53, Tinbergen Institute.
  12. Haliassos, Michalis & Jansson, Thomas & Karabulut, Yigitcan, 2014. "Incompatible European partners? Cultural predispositions and household financial behavior," SAFE Working Paper Series 58, Research Center SAFE - Sustainable Architecture for Finance in Europe, Goethe University Frankfurt.

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