Date of Award

1-1-2012

Document Type

Campus Access Dissertation

Department

Moore School of Business

First Advisor

Chuck C Y Kwok

Second Advisor

Omrane Guedhami

Abstract

Culture reflects the fundamental institutions of society and contributes to different perceptions, attitudes, reactions and therefore behaviors in economic activities. This dissertation extends a growing literature on culture and finance by focusing on the influence of culture on corruption in bank lending and corporate debt maturity choice. The first essay examines how national culture - in particular, collectivism - influences corruption in bank lending. Focusing on banks' loan screening and monitoring processes, we propose that collectivism may increase loan applicants' and loan officers' incentives to engage in bribes, increase the effectiveness of bribes, reduce the chance of detection, and impose less severe punishment on loan officers if caught. Using a World Bank data set covering 3,835 firms across 38 countries, we find strong, robust evidence that firms domiciled in collectivist countries perceive a higher level of lending corruption than firms domiciled in individualist countries. This positive link between collectivism and bank corruption is stronger in small and medium firms, privately owned firms, and non-export firms, while it is weaker in countries with stronger uncertainty avoidance sentiment, a higher (lower) fraction of foreign-owned (government-owned) banks, a higher number of large banks, and stronger legal institutions. Our findings have important implications for policymakers and regulators working on financial and economic development. In the second essay, we investigate the influence of national culture on corporate debt maturity choice. Based on the framework of Williamson, we argue that culture located in social embeddedness level can shape contracting environments by serving as an informal constraint that affects human actors' incentives and choices in market exchange. We therefore expect national culture to be related to debt maturity structure after controlling for legal, political, financial, and economic institutions. Using Hofstede's four cultural dimensions (uncertainty avoidance, collectivism, power distance, and masculinity) as proxies for culture, and using a sample of 114,723 firm-years from 40 countries over the 1991-2006 period, we find robust evidence that firms located in countries with high uncertainty avoidance, high collectivism, high power distance, and high masculinity tend to use more short-term debt. We interpret these results as consistent with the view that national culture helps explain cross-country variations in the maturity structure of corporate debt.

Rights

© 2012, Xiaolan Zheng

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