Faculty of Business External Research Seminar | Finance| Orkun Saka

Business School Brown Bag Seminar | Finance | Orkun Saka

Date: Monday, April 15, 2024
Time: 13:00-14:30
Location: AB2 345


Speaker: Orkun Saka - City, University of London


Title: Cultural Stereotypes of Multinational Banks

Abstract: We present evidence that cultural trust biases (i.e., stereotypes) play an important role in shaping multinational banks’ cross-border exposures. Employing European regulatory data on banks’ sovereign debt portfolios and new nationally representative surveys across 30 European countries, we show that a multinational bank is more likely to lend to the government of a country when the residents of the countries where it operates exhibit higher trust in the residents of that country. This result is robust to saturating our models with time-varying fixed effects at bank and country-pair levels, controlling for a large vector of financial, informational, political and cultural linkages as well as instrumenting trust via genetic and somatic similarities. Bank-level trust similarly drives corporate lending across borders and tilts banks’ sovereign portfolios towards long-term maturities. Its role is amplified especially when governments are hit by salience shocks such as Eurozone crises and Brexit referendum. As a potential transmission channel of cultural stereotypes from foreign bank branches to headquarters, we analyse banks’ tendency to hire internally across borders for high-level managerial positions.