Effects of Culture on Firm Risk-Taking : A Cross-Country and Cross-Industry Analysis

Author/Editor:

Roxana Mihet

Publication Date:

August 1, 2012

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This paper investigates the effects of national culture on firm risk-taking, using a comprehensive dataset covering 50,000 firms in 400 industries in 51 countries. Risk-taking is found to be higher for domestic firms in countries with low uncertainty aversion, low tolerance for hierarchical relationships, and high individualism. Domestic firms in such countries tend to take substantially more risk in industries which are more informationally opaque (e.g. finance, mining, IT). Risk-taking by foreign firms is best explained by the cultural norms of their country of origin. These cultural norms do not proxy for legal constraints, insurance safety nets, or economic development.

Series:

Working Paper No. 12/210

Subject:

English

Publication Date:

August 1, 2012

ISBN/ISSN:

9781475505603/1018-5941

Stock No:

WPIEA2012210

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

50

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