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Using comprehensive corporate and retail loan data, we show that the corporate culture of banks explains their risk-taking behaviour. Banks whose corporate culture leans towards aggressive competition are associated with riskier lending practices: higher approval rate, lower borrower quality, and fewer covenant requirements. Consequently, these banks incur larger loan losses and make greater contributions to systemic risk. The opposite behaviour is observed among banks whose culture emphasizes control and safety. Our findings cannot be explained by heterogeneity in a bank's business model, CEO compensation incentives or CEO characteristics. We use an exogenous shock to the US banking system during the 1998 Russian default crisis to support a causal inference.We are grateful to Marc Goergen (Associate Editor) and three anonymous referees for very helpful comments and suggestions. We also thank . Harvard IV-4 Psychosocial Dictionary. For instance, words like 'fast, expand, performance and win' are associated with compete culture, words like 'envision, freedom and venture' are associated with create culture, words like 'cooperate, human and partner' are associated with collaborate culture and words like 'monitor, competence and long-term' are associated with control culture.C 2019 British Academy of Management.

This paper investigates loan loss provisioning (LLP) behaviour by Vietnamese banks during the period 2006-2012. We test the capital, income-smoothing and cyclical management hypotheses and examine whether the inclusion of X-efficiencies and/or risk control variables influences provisioning behaviour. When the X-efficiency estimates are incorporated into the models, Vietnamese banks do not exhibit counter-cyclical or capital management manipulation by managers, but counter cyclical income smoothing. Yet, the inclusion of risk control variables in x-efficiency scores (either equity or reserves for impaired loans) supports the addition of capital management hypotheses.JEL Classification: C33: G01: G28: G21

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