Title: The role of culture in mitigating information asymmetries in portfolio choice decisions

Authors: Stefanos Ioannou; Tamilyam Memanova; Nikolaos Mylonidis

Addresses: Oxford Brookes Business School, Oxford Brookes University, Headington Campus, OX3 0BP, Oxford, UK ' Department of Economics, University of Ioannina, 45110, Greece ' Department of Economics, University of Ioannina, 45110, Greece

Abstract: We expand the literature on investment home bias by considering the impact of novel indicators associated with information asymmetries and cultural proximity. Our sample covers the period 2014-2019 and includes 10,205 country pairs. For measuring information asymmetries, we construct a novel indicator based on financial secrecy data. For cultural proximity we consider, separately, the impact of religious proximity and the role of countries as hosts to global financial centres. We expect the presence of global financial centres to feed positively into investors' sense of familiarity and trust. Our findings show that foreign portfolio investors' decisions are negatively affected by the presence of between-country informational asymmetries. In contrast, religious proximity fosters trust and increases the willingness of investors to invest in foreign financial assets. Finally, we detect a financial centre bias, conceptually related to home bias. All else the same, countries hosting global financial centres are more likely to invest reciprocally.

Keywords: international capital flows; portfolio investment; informational asymmetries; cultural proximity; financial centre bias.

DOI: 10.1504/IJBAAF.2025.151908

International Journal of Banking, Accounting and Finance, 2025 Vol.15 No.4, pp.444 - 484

Received: 24 Jul 2024
Accepted: 26 Jun 2025
Published online: 25 Feb 2026 *

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