Cultural biases in the investment decision-making process of institutional investors

With reference to a large sample collected between 2014 and 2024 of nearly 300 fund managers, this paper draws on both qualitative and quantitative studies to examine how cross-cultural differences influence institutional investors' investment decision-making. By so doing, it investigates whether there are significant cultural biases in investment behaviours, in addition to the cognitive and emotional biases found in previous finance literature. The findings indicate that Chinese fund managers—in contrast to Western fund managers—paid more attention to macroeconomic information, were more likely to adopt a top-down approach, tended to have a shorter stock holding period on average and for losing stocks, in particular, and tended to evaluate a company according to its context. This evidence of systematic behavioural differences between two cultural groups indicates that investors may habitually underrate some investment information or strategies because of their cultural biases, which could have significant implications for traditional finance theory, investment practice, (green) financing, and policy making.