Culture, legal origins, and financial development

This study proposes that countries with a cultural orientation toward individualism tend to enjoy a higher level of financial development. Estimates based on cross‐country data lend strong support to this hypothesis. Specifically, the results indicate that existing disparity in the level of financia...

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Bibliographic Details
Main Author: Ang, James Beng
Other Authors: School of Social Sciences
Format: Article
Language:English
Published: 2019
Subjects:
Online Access:https://hdl.handle.net/10356/105393
http://hdl.handle.net/10220/48677
http://dx.doi.org/10.1111/ecin.12755
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Institution: Nanyang Technological University
Language: English
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Summary:This study proposes that countries with a cultural orientation toward individualism tend to enjoy a higher level of financial development. Estimates based on cross‐country data lend strong support to this hypothesis. Specifically, the results indicate that existing disparity in the level of financial development is significantly correlated with variation in the extent of individualism across countries, where a one standard deviation increase in individualism is associated with 0.631 standard deviations improvement in the level of financial development. The results are robust to a number of considerations. Additional results provide some support to the notion that individualistic culture and legal origin may serve as complements rather than substitutes to each other. (JEL O40, O50, Z10)