Using unique hand-collected data for 336 large banks across 48 countries, together with values of national culture, our empirical analysis uncovers three new robust findings. First, variations of bank risk-taking across national culture and CEO power are more pronounced when cultural values and CEO power indicators are high. Second, while the individualism dimension of national culture has a moderating influence, the uncertainty avoidance dimension has a reinforcing effect, on the relationship between CEO power and bank risk-taking. In more detail, the results for the average marginal effect of CEO power on risk for different cultural values show that CEO power has a negative (positive) or insignificant impact on bank risk-taking when the value of individualism (uncertainty avoidance) is low; however, the impact becomes positive (negative) and statistically significant as the value of individualism (uncertainty avoidance) increases. Third, intra-cultural diversity matters: ‘tight’ cultures (e.g., strong social norms) are more pronounced than ‘loose’ cultures (e.g., heterogeneous values) in influencing bank risk.

This study examines why firms’ access to finance differs across countries and assesses the extent to which democracy and financial liberalisation account for these variations. Using political economy and liberalisation theories as a foundation, we analyse a comprehensive dataset of over 110,000 firms across 112 economies between 2006 and 2021. Although previous research identifies firm-level and macroeconomic sources of financial frictions, evidence on the institutional drivers of cross-country financial access remains limited. Our findings show that democracy and financial liberalisation, when considered independently, are associated with reduced access to finance. However, when both conditions coexist, they ease financing barriers and enhance access to finance. These results remain consistent across multiple robustness tests, including alternative model specifications, endogeneity corrections, and various measures of institutional quality and financial openness. Overall, the study highlights that neither democracy nor liberalisation alone is sufficient to enhance access to credit. Instead, simultaneous institutional strengthening and financial market access are necessary to ease financing barriers. This has important policy implications, particularly for emerging and developing economies seeking to expand firm-level access to capital and stimulate economic growth.