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The gravity of culture for finance

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  • Karolyi, G. Andrew

Abstract

Scholarship in finance has paid relatively little attention to the role of culture in financial decision-making compared to other business disciplines and economics. This paper will review what research has been done to date including a critical assessment of the key databases used to measure differences in cultural values. Notwithstanding the concerns with the measures of cultural values, I conduct an empirical analysis of the role of cultural distance for explaining the foreign bias in international portfolio holdings using traditional gravity models in international economics. I affirm the statistical explanatory power of culture for these investment biases and outline several new potential directions for research.

Suggested Citation

  • Karolyi, G. Andrew, 2016. "The gravity of culture for finance," Journal of Corporate Finance, Elsevier, vol. 41(C), pages 610-625.
    • Handle: RePEc:eee:corfin:v:41:y:2016:i:c:p:610-625
    DOI: 10.1016/j.jcorpfin.2016.07.003
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