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Individualism, formal institutional environments, and bank capital decisions

Author

Listed:
  • Mohammad Bitar
  • Amine Tarazi

    (UNILIM - Université de Limoges, LAPE - Laboratoire d'Analyse et de Prospective Economiques - GIO - Gouvernance des Institutions et des Organisations - UNILIM - Université de Limoges)

Abstract

We examine how individualism affects bank capital decisions worldwide and in the United States at the state level. Based on a sample of 7034 banks in 68 countries, we establish three major findings. First, individualism is negatively and significantly associated with bank regulatory capital, and the association is independent of the influence of formal institutional environments. Second, effective legal enforcement magnifies individualism's negative effect on bank regulatory capital. Finally, focusing on the United States, we also find that banks in individualistic states hold less regulatory capital than banks in collectivist states do. Effective state-level legal enforcement magnifies the effect of individualism. Our findings suggest that individualism constrains regulators, as regulatory guidelines or formal institutional factors operate very differently depending on the informal institutional environment.

Suggested Citation

  • Mohammad Bitar & Amine Tarazi, 2022. "Individualism, formal institutional environments, and bank capital decisions," Post-Print hal-04681694, HAL.
    • Handle: RePEc:hal:journl:hal-04681694
    DOI: 10.1016/j.jcorpfin.2022.102244
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    Cited by:

    1. Duan, Yuejiao & Guedhami, Omrane & Li, Xinming & Zhao, Daxuan, 2024. "Individualism and bank financial structure similarity," Journal of International Money and Finance, Elsevier, vol. 148(C).
    2. 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).
    3. Fărcaș, Ioana Georgiana & Nistor, Simona, 2023. "The impact of culture on government interventions in the banking sector," Economic Modelling, Elsevier, vol. 129(C).
    4. Silvia, Ani & Viverita, V. & Chalid, Dony Abdul, 2024. "The effects of formal institutions and national culture on equity-based financing in Islamic banks," Pacific-Basin Finance Journal, Elsevier, vol. 86(C).
    5. Shu, Ao & Kuang, Xiasi & Zhou, Yue & Zhou, Ke & Yin, Xiaoling, 2025. "Returnees and remuneration: The influence of international experience on compensation policies in chinese firms," International Review of Financial Analysis, Elsevier, vol. 105(C).
    6. M. Kouzez & J. Y. Lee & G. Branellec & J. Oh, 2023. "RSE et banques en ligne : le cas du marché sud-coréen," Post-Print hal-04469792, HAL.

    More about this item

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • K12 - Law and Economics - - Basic Areas of Law - - - Contract Law
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility

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