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Do cultural differences affect the share price puzzle?

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  • Ferretti, Riccardo
  • Pattitoni, Pierpaolo
  • Pedrazzoli, Alessia

Abstract

We examine the impact of cultural differences on nominal share prices across 63 countries from 2002 to 2018. Using institutional and catering theories, we assess how cultural dimensions—including World Governance Indicators (WGI), legal systems, religious influences, and GLOBE dimensions—affect the spatial heterogeneity of share price levels. Our findings indicate that share prices are higher in countries with common law systems and comprehensive information reporting, as these environments tend to attract institutional investors. Conversely, cultural traits emphasizing altruistic values correspond with lower share prices, reflecting the preferences of individual investors.

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  • Ferretti, Riccardo & Pattitoni, Pierpaolo & Pedrazzoli, Alessia, 2024. "Do cultural differences affect the share price puzzle?," Journal of Multinational Financial Management, Elsevier, vol. 75(C).
    • Handle: RePEc:eee:mulfin:v:75:y:2024:i:c:s1042444x24000380
    DOI: 10.1016/j.mulfin.2024.100873
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    Keywords

    Behavioral finance; Catering theory; National culture; GLOBE; Institutions; Nominal share price; Share price puzzle; Stock split;
    All these keywords.

    JEL classification:

    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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