Do Foreign Lenders’ National Cultures Affect Loan Pricing?

Kostas Pappas, Alice Liang Xu

Research output: Contribution to journalArticlepeer-review


We examine the role of foreign lenders’ national cultures in the pricing of syndicated loans. Using Schwartz’s cultural dimensions, embeddedness and mastery, we find that foreign lenders domiciled in countries with higher embeddedness and mastery scores offer lower interest rates. These findings are robust to a battery of robustness tests and incremental to the effects of formal institutions. We also document that greater information asymmetry and foreign lenders’ bargaining powers strengthen the impact of the foreign lenders’ cultural values on loan pricing. An additional analysis shows that the intensity of loan covenants is also negatively related to the embeddedness and mastery scores of the foreign lenders’ countries of domicile. Our findings suggest that cross-border debt contracting decisions are not only determined by objective judgments about risk and return but also depend on the subjective assertion of values and beliefs guided by informal institutions, such as cultural norms. Cultural values can nurture and shape economic incentives and perceptions of sophisticated professional bankers in increasingly globalized market settings, even when the financial stakes are substantial.
Original languageEnglish
JournalInternational Journal of Finance and Economics
Publication statusPublished - 1 Feb 2021


  • syndicated loan
  • cost of debt
  • cross-border lending
  • national culture
  • Schwartz


Dive into the research topics of 'Do Foreign Lenders’ National Cultures Affect Loan Pricing?'. Together they form a unique fingerprint.

Cite this