Bank Culture Risk-Taking: Evidence from the European Banking Sector

Abstract

This paper is the first to empirically study the effects of different types of corporate culture on the risk-taking behavior of European banks. Based on a text analysis approach following the competing values framework, we analyze a hand-collected sample of 167 European banks from 2005 to 2015. We find that collaborate- and control-cultures have a risk-mitigating effect in terms of credit and default risk. Additionally, we find that collaborate- and control-banks have an even lower risk-taking in the recent financial crises, while compete-banks face erratically higher risks. Finally, we find that collaborate- and control-cultures affect the efficacy of govern-ance mechanisms.

Keywords: Bank Risk-Taking; Bank Culture; Competing Values Framework

JEL Classification: G21, G32, G34, G38, M14