Three Studies on the Effects of National Culture on Bank Risk-Taking, Deposits and Profitability

  • Stella Mourouzidou Damtsa

Student thesis: Doctor of Business Administration


These three studies on the effect of national culture on banking aim at advancing knowledge and understanding of bank risk-taking, deposits and profitability by adding culture to their determining factors. Banking is a highly regulated industry, and one would expect informal institutions such as national culture not to influence management decisions. However, it seems that bank managers but also bank customers are susceptible to cultural biases making their influence on risk taking, deposit and profitability levels statistically and economically significant. In the first study, I find that national culture is an important bank-risk determinant. Specifically, I find a positive (negative) association between the cultural values of individualism and hierarchy (trust) and domestic bank risk-taking. This relation weakened during the recent financial crisis and does not hold for global banks, regardless of the period under investigation. In the second study, I report a positive association between trust and deposits which holds for domestic as well as global banks, supporting the popular view that banking is based on trust. Motivated by two relatively new regulations (Net Stability Funding Ratio and Liquidity Coverage Ratio), enforced to safeguard stable liquidity, I use interaction effects to find that high deposit volatility mitigates the positive impact of trust on deposit levels. In the third study, I identify national culture as an important determinant of bank profitability. Looking separately into global and domestic banks, the former are less prone to cultural influences compared to the latter. Furthermore, domestic banks with foreign ownership/management are less susceptible to cultural biases compared to domestic banks with local ownership/management. Finally, banks operating in conservative, hierarchical societies are expected to face more challenges with fintech disturbance, compared to banks operating in egalitarian societies. My results are statistically and economically significant and robust to endogeneity tests mitigating reverse causality and confounding effect concerns.
Date of Award1 Aug 2018
Original languageEnglish
Awarding Institution
  • The University of Manchester
SupervisorKonstantinos Stathopoulos (Supervisor) & Andreas Milidonis (Supervisor)


  • Domestic Banks
  • Global Banks
  • Bank Profitability
  • Bank Risk-Taking
  • National Culture
  • Bank Deposits

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