Culture and the capital–performance nexus in dual banking systems

Abstract

While recent surveys have taken a special interest in culture to explain the failure of existing regulation, empirical evidence on the role of culture in influencing the regulation-performance link is still largely unexplored. In this paper, we ask the following: Should regulators and policy makers make room for culture as an effective tool for a successful bank regulatory environment? We identify three proxies for cultural values derived from Hofstede (1980, 2001) and the World Values Survey and investigate to what extent individualism, masculinity, and trust can enhance or impede the regulation-performance link for conventional and Islamic banks. Analyzing a panel of 729 banks operating in 33 countries from 1999 to 2013, our paper provides empirical evidence that cultural values enhance the regulationperformance link for the two bank types. Our results have important policy implications: our paper represents a first initiative and provides evidence that culture has merits and can be used as an additional tool to implement regulatory guidelines in a successful way.

Corporate Cash Holdings and National Culture: Evidence from the Middle East and North Africa Region

“…Based on data availability of annual reports and access to databases, this study starts with a preliminary sample of 500 banks from 22 countries, and after applying several filtrations, the final sample included 395 banks from 19 different countries in the MENA region for 16 years between 1999 and 2014. Selecting banks for this study is supported by Bitar et al (2020), who stated that bank regulations and performance are influenced by culture. The sample includes countries located in the MENA region which are: Algeria; Bahrain; Egypt; Iran; Iraq; Israel; Jordan; Kuwait; Lebanon; Libya; Morocco; Oman; Palestine; Qatar; Saudi Arabia; Syria; Tunisia; United Arab Emirates; and Yemen.…”

A survey on national culture and corporate financial decisions: current status and future research

“…Some of the studies concluded that culture can help to elaborate on the weak application of the regulatory system and deterrence of any potential financial turmoil. Bitar et al (2019) stated that bank regulations and performance are influenced by culture. For example, Islamic banks adopt a greater amount of ethical and proper guidelines and emphasize more to financial stability, equity and justice than conventional banks (Khan, 2010; Gheeraert, 2014).…”

“…Likewise, national culture influences the country's financial system, financial institutions and economic mechanism (Boubakri et al , 2017). Moreover, the recent study by Bitar et al (2019) evidenced that culture has a significant impact on the capital-performance linkage between Islamic and conventional banks. Consequently, values and norms are powerful and effective tools to control the environment within the firms, banks and financial institutions and employees working in those institutions.…”

“…Culture is the abstraction of intangible, multifaceted and amalgamated attributes that are difficult to access and quantify (Bitar et al , 2020). However, there are various frameworks which parsimoniously explain the impact of cultural facets on various variables of interest.…”

Does culture influence our ways in handling COVID-19?

“…Only when the narrative fits with the existing culture, it can be considered credible (Sherman and Roberto, 2020). Although culture is abstract, intangible and difficult to be quantified (Bitar et al, 2020), its influence to society is inherent. For example, culture serves as informal intuition for financial and strategic decision (Nash and Patel, 2019), and national culture has relation to the country financial sector (Kutan et al, 2020) or global financial crisis (Tran, 2020).…”