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National culture and financial systems: The conditioning role of political context

Sebastián Lavezzolo, Carlos Rodríguez-Lluesma and Marta M. Elvira

Journal of Business Research, 2018, vol. 85, issue C, 60-72

Abstract: Building on research that addresses why some financial systems are based on banks and others on markets, this study stresses that culturally-based social preferences regarding uncertainty avoidance help explain cross-national differences in financial system configuration. We propose a theory in which political institutions condition this relationship. National culture is a good predictor of financial systems as long as governments are constrained and therefore able to credibly commit to not interfering in the functioning of banks and markets. We adopt a strict definition of culture that focuses only on inherited dimensions, while postulating uncertainty avoidance as a proxy for the societal attitudes that channel those cultural priors. We find that in a political context with unconstrained government, national culture fails to explain financial system variation. In contrast, when political institutions limit governmental action, culturally-driven preferences for uncertainty avoidance affect significantly financial configuration.

Keywords: National culture; Financial systems; Banking; Uncertainty, avoidance; Political institutions; Government (search for similar items in EconPapers)
Date: 2018
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Handle: RePEc:eee:jbrese:v:85:y:2018:i:c:p:60-72