Do cultural differences affect the share price puzzle?

Riccardo Ferretti, Pierpaolo Pattitoni and Alessia Pedrazzoli

Journal of Multinational Financial Management, 2024, vol. 75, issue C

Abstract: We examine the impact of cultural differences on nominal share prices across 63 countries from 2002 to 2018. Using institutional and catering theories, we assess how cultural dimensions—including World Governance Indicators (WGI), legal systems, religious influences, and GLOBE dimensions—affect the spatial heterogeneity of share price levels. Our findings indicate that share prices are higher in countries with common law systems and comprehensive information reporting, as these environments tend to attract institutional investors. Conversely, cultural traits emphasizing altruistic values correspond with lower share prices, reflecting the preferences of individual investors.

Keywords: Behavioral finance, Catering theory, National culture; GLOBE; Institutions; Nominal share price; Share price puzzle; Stock split (search for similar items in EconPapers)
JEL-codes: G02 G12 G14 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:mulfin:v:75:y:2024:i:c:s1042444x24000380

DOI: 10.1016/j.mulfin.2024.100873

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