The national culture as a determinant of ERM quality: Empirical evidence in the European banking context

Abstract

This paper aims to investigate whether and how enterprise risk management (ERM) quality may be influenced by national culture. Using a sample of 105 banks from 21 countries over the period of 2013-2020, we document that power distance, masculinity, uncertainty avoidance and long-term orientation are significantly associated with ERM quality. Our research contributes to the existing risk literature by highlighting how the dimensions of national culture impact ERM quality. The article also discusses how the cultural dimensions of a national culture embedded in the organizational values can influence the quality of bank's risk management processes. This study helps banking regulators by providing a clear picture of how an informal institution, such as national culture, contributes to explaining differences in the quality of ERM implementation.