Risk-Taking in The Banking Sector: Do Cultural Differences Matter?

Somya M. Eljilany, Ibrahim R. Hegazy and Ahmed F. Elbayoumi ()
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Somya M. Eljilany: Department of Accounting, Higher Institute of Management and Accounting, Sohag, Arab republic of Egypt
Ibrahim R. Hegazy: Department of Accounting, Faculty of Commerce, Cairo University, Cairo, Arab republic of Egypt
Ahmed F. Elbayoumi: Department of Accounting, The American University in Cairo, and Faculty of Commerce, Cairo University, Cairo, Arab republic of Egypt

Journal of Accounting and Management Information Systems, 2023, vol. 22, issue 3, 464-489

Abstract: Research Question- Why the banking sector in some countries experienced more severe panic than the banking sector in other countries? And why some countries recovered faster than others? Motivation- In a response to the global financial crisis, research on the motivation risk-taking or risk-aversion has been increasingly grown to investigate whether culture differences among countries affect the behaviors of individuals inside societies to be risk-taking or risk-aversion? Idea- Test the effect of the four cultural dimensions of Hofstede (2001) i.e. (individualism, uncertainty avoidance, power distance and masculinity) on risk-taking in the banking sector. Data- Our sample consists of 2620 bank-year observations of 262 banks from four countries covering the period from (2011 to 2020) collected from Refinitiv Eikon database. Tools- The statistical techniques used are descriptive analysis, correlation and OLS regression. Findings- We found the effect of national culture on risk-taking is significant for all dimensions. Individualism and masculinity are negatively related to risk-taking and uncertainty avoidance is positively related to risk-taking. For power distance dimension, we found power distance of Hofstede (2001) is significantly and negatively related to risk-taking, while power distance of House et al. (2004) is significantly and positively related to risk-taking. We confirmed our findings with robustness test. Contribution- Our results confirmed the “cushion hypothesis†formulated by Hsee & Weber (1999). We provide evidence on the significant effect of masculinity, long-term orientation and indulgence on bank risk-taking where most previous studies either excluded or found them insignificant. The impact of all cultural dimensions has been confirmed using a small sample of countries.

Keywords: risk taking; individualism; uncertainty avoidance; power distance; masculinity, cushion hypothesis (search for similar items in EconPapers)
JEL-codes: M41 (search for similar items in EconPapers)
Date: 2023
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