The Effect of Societal Cultures on Financial Development and Openness Levels: A Comparison of Selected Western and Turkic Countries

Individual behaviors, such as the willingness to take investment risks, participation in newly introduced financial instruments, and the prioritization of individual interests over collective interests in investment decisions, are shaped by the cultural environment in which individuals reside. In this regard, the purpose of this study is to examine how the cultures of Turkic and selected Western countries influence their respective levels of financial development. The sample consists of an annual panel dataset covering the period from 2001 to 2019 and includes countries from the Turkic world and selected Western economies. Countries are classified into two cultural blocs based on Hofstede’s individualism index. The Turkic bloc, characterized by low individualism, includes Türkiye, Azerbaijan, Kazakhstan, and Kyrgyzstan, whereas the Western bloc, characterized by high individualism, includes Australia, Belgium, Canada, Germany, the Netherlands, the United Kingdom, the United States, Italy, and South Africa. The findings indicate that when Hofstede’s individualism index and the Turkic–Western bloc classification are incorporated into the model, the relationship between capital account openness and financial depth becomes culture-dependent. In the Turkic bloc, the effect of capital account openness on financial depth is weak and unstable, whereas in the Western bloc, it is stronger and more consistent.