 Does dialect similarity add value to banks? Evidence from ChinaWenlong Bian, Yang Ji and Hao Zhang () Journal of Banking & Finance, 2019, vol. 101, issue C, 226-241 Abstract: This study examines the value of language, as an important dimension of culture, to banks. Based on a unique hand-collected dataset of Chinese commercial banks and a county-level dialect dataset, we find that a higher degree of dialect similarity between the chairman and the CEO is associated with a higher return on assets, a higher return on equity, and a lower cost-to-income ratio, suggesting that dialect similarity plays a positive role in improving bank performance. Further analyses show that dialect similarity has no significant association with bank risk and bank expansion. In addition, it does not cause higher CEO pay or lower pay-performance sensitivity. These results indicate that dialect similarity does not lower the monitoring effectiveness. We also investigate the relation between dialect similarity and banks’ agency costs and the results show that dialect similarity reduces agency costs significantly. Our findings are robust to alternative measures of dialect similarity, the separation of the “dialect level effect”, and the potential endogeneity of dialect similarity. Keywords: Dialect similarity; Cultural revolution; Bank performance (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:101:y:2019:i:c:p:226-241 DOI: 10.1016/j.jbankfin.2019.02.013 Access Statistics for this article Journal of Banking & Finance is currently edited by Ike Mathur More articles in Journal of Banking & Finance from Elsevier |
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