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Risk-Taking in The Banking Sector: Do Cultural Differences Matter?

Author

Listed:
  • Somya M. Eljilany

    (Department of Accounting, Higher Institute of Management and Accounting, Sohag, Arab republic of Egypt)

  • Ibrahim R. Hegazy

    (Department of Accounting, Faculty of Commerce, Cairo University, Cairo, Arab republic of Egypt)

  • Ahmed F. Elbayoumi

    (Department of Accounting, The American University in Cairo, and Faculty of Commerce, Cairo University, Cairo, Arab republic of Egypt)

Abstract

Research Question- Why the banking sector in some countries experienced more severe panic than the banking sector in other countries? And why some countries recovered faster than others? Motivation- In a response to the global financial crisis, research on the motivation risk-taking or risk-aversion has been increasingly grown to investigate whether culture differences among countries affect the behaviors of individuals inside societies to be risk-taking or risk-aversion? Idea- Test the effect of the four cultural dimensions of Hofstede (2001) i.e. (individualism, uncertainty avoidance, power distance and masculinity) on risk-taking in the banking sector. Data- Our sample consists of 2620 bank-year observations of 262 banks from four countries covering the period from (2011 to 2020) collected from Refinitiv Eikon database. Tools- The statistical techniques used are descriptive analysis, correlation and OLS regression. Findings- We found the effect of national culture on risk-taking is significant for all dimensions. Individualism and masculinity are negatively related to risk-taking and uncertainty avoidance is positively related to risk-taking. For power distance dimension, we found power distance of Hofstede (2001) is significantly and negatively related to risk-taking, while power distance of House et al. (2004) is significantly and positively related to risk-taking. We confirmed our findings with robustness test. Contribution- Our results confirmed the “cushion hypothesis†formulated by Hsee & Weber (1999). We provide evidence on the significant effect of masculinity, long-term orientation and indulgence on bank risk-taking where most previous studies either excluded or found them insignificant. The impact of all cultural dimensions has been confirmed using a small sample of countries.

Suggested Citation

  • Somya M. Eljilany & Ibrahim R. Hegazy & Ahmed F. Elbayoumi, 2023. "Risk-Taking in The Banking Sector: Do Cultural Differences Matter?," Journal of Accounting and Management Information Systems, Faculty of Accounting and Management Information Systems, The Bucharest University of Economic Studies, vol. 22(3), pages 464-489, September.
    • Handle: RePEc:ami:journl:v:22:y:2023:i:3:p:464-489
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    risk taking; individualism; uncertainty avoidance; power distance; masculinity; cushion hypothesis;
    All these keywords.

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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