Essays on the influence of culture on equity markets

Guide(s)

Thampy, Ashok

Department

Finance and Accounting

Area

Finance and Accounting

University

Indian Institute of Management Bangalore

Place

Bangalore

Publication Date

3-31-2021

Year Awarded

March 2021

Year Completed

March 2021

Year Registered

June 2015

Abstract

Public equity markets enhance access to capital for firms. This thesis examines the role of culture in the development of public equity markets in a cross-country setting. Aggarwal et al. (2014a) and Nadler et al. (2019) point out that there is limited research exploring the role of national culture on finance and that more work is required to understand how financial markets and decisions are affected by national culture and formal institutions. This dissertation is formed of five chapters. Chapter one introduces and integrates the dissertation work. We structure our main chapters around the following issues: In Chapter 2 (Essay 1), we use a cross-country panel data of 55 countries for the period 1995 to 2018 to explore the role of Hofstede’s cultural dimensions (Hofstede, 1980) on the development of public equity markets. The focus in Essay 1 is on the main stock exchange (or the main board) of a country, and we examine the impact of national culture on the market capitalization and total capital raised on the equity markets. The main stock exchange is the dominant stock exchange of the country where the large and medium scale enterprises are listed. We find that national culture helps explain the differences in the development of the equity markets across countries after controlling for macroeconomic and formal institutional variables. Specifically, countries with high uncertainty avoidance and high individualism negatively influence the development of equity markets. Further, high cultural distance from the ideal country profile negatively affects the development of public equity markets. Literature indicates that the impact of financial development and formal institutions on firms depends on the size of the firm (e.g., Beck et al., 2005; Crouzet et al., 2020). In Chapter 3 (Essay 2), we explore if national culture has a differential impact on the development of public equity markets for small firms (as compared to equity market for large firms).

Pagination

212p.

Copyright

Indian Institute of Management Bangalore

Document Type

Dissertation

DAC Chairperson

Thampy, Ashok

DAC Members

Basu, Sankarshan; Kumar, K

Type of Degree

Ph.D.

Relation

DIS-IIMB-FPM-P21-05

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