CEO power, bank risk-taking and national culture: International evidence

Eilnaz Kashefi Pour, Moshfique Uddin, Victor Murinde and Shima Amini

Journal of Financial Stability, 2023, vol. 67, issue C

Abstract: Using unique hand-collected data for 336 large banks across 48 countries, together with values of national culture, our empirical analysis uncovers three new robust findings. First, variations of bank risk-taking across national culture and CEO power are more pronounced when cultural values and CEO power indicators are high. Second, while the individualism dimension of national culture has a moderating influence, the uncertainty avoidance dimension has a reinforcing effect, on the relationship between CEO power and bank risk-taking. In more detail, the results for the average marginal effect of CEO power on risk for different cultural values show that CEO power has a negative (positive) or insignificant impact on bank risk-taking when the value of individualism (uncertainty avoidance) is low; however, the impact becomes positive (negative) and statistically significant as the value of individualism (uncertainty avoidance) increases. Third, intra-cultural diversity matters: ‘tight’ cultures (e.g., strong social norms) are more pronounced than ‘loose’ cultures (e.g., heterogeneous values) in influencing bank risk.

Keywords: National culture; Individualism; Uncertainty avoidance; Bank risk-taking; CEO power; Hierarchical linear modeling (search for similar items in EconPapers)
JEL-codes: G21 G32 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finsta:v:67:y:2023:i:c:s1572308923000335

DOI: 10.1016/j.jfs.2023.101133

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