The Relationship between National Culture and Capital Market Efficiency: An International Study

Document Type : Original Article

Authors
1 Department of Economic Sciences, Ka.C., Islamic Azad University, Karaj, Iran
2 Department of Accounting, Ka.C., Islamic Azad University, Karaj, Iran
Abstract
The present study aims to examine the relationship between national culture and the operational efficiency of capital markets at the international level, with a particular focus on Hofstede’s six cultural dimensions. The main objective of the study is to investigate the influence of national cultural components on the liquidity and operational efficiency of capital markets in countries with different cultural structures. The statistical population comprised all countries worldwide; however, due to limitations in access to complete data, the final sample consisted purposively of 76 countries. National culture data were obtained from the Hofstede database, while capital market efficiency data for 2021 were extracted from the Global Economy database. Following the initial classification of the data, the dataset was transferred to SPSS version 26, and descriptive and inferential analyses were conducted. The results of the multiple regression analysis in the overall model indicated that only long-term orientation had a significant relationship with capital market efficiency. Furthermore, the subgroup analysis showed that the model was not statistically significant in societies with low power distance, and none of the cultural dimensions had a significant effect. In contrast, in societies with high power distance, individualism had a significant positive relationship with capital market efficiency. These findings not only contribute to filling the existing research gap but also have practical implications for policymakers, regulatory authorities, financial managers, and investment firms. Overall, improving the operational efficiency of capital markets requires policies that are aligned with the prevailing cultural structure. In societies with high power distance, strengthening individual autonomy and encouraging independent investor participation may have the greatest potential to enhance capital market efficiency.
Keywords

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