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Individualism, formal institutional environments, and bank capital decisions

Bitar, Mohammad; Tarazi, Amine


Amine Tarazi


We examine how individualism affects bank capital decisions worldwide and in the United States at the state level. Based on a sample of 7034 banks in 68 countries, we establish three major findings. First, individualism is negatively and significantly associated with bank regulatory capital, and the association is independent of the influence of formal institutional environments. Second, effective legal enforcement magnifies individualism's negative effect on bank regulatory capital. Finally, focusing on the United States, we also find that banks in individualistic states hold less regulatory capital than banks in collectivist states do. Effective state-level legal enforcement magnifies the effect of individualism. Our findings suggest that individualism constrains regulators, as regulatory guidelines or formal institutional factors operate very differently depending on the informal institutional environment.


Bitar, M., & Tarazi, A. (2022). Individualism, formal institutional environments, and bank capital decisions. Journal of Corporate Finance, 76, Article 102244.

Journal Article Type Article
Acceptance Date Jul 8, 2022
Online Publication Date Aug 5, 2022
Publication Date Oct 1, 2022
Deposit Date Aug 1, 2022
Publicly Available Date Feb 6, 2024
Journal Journal of Corporate Finance
Print ISSN 0929-1199
Publisher Elsevier
Peer Reviewed Peer Reviewed
Volume 76
Article Number 102244
Keywords Individualism; formal institutional environments; legal enforcement; regulatory capital
Public URL
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Additional Information This article is maintained by: Elsevier; Article Title: Individualism, formal institutional environments, and bank capital decisions; Journal Title: Journal of Corporate Finance; CrossRef DOI link to publisher maintained version: