Culture and Corporate Governance: The Influence of Language and Religion in Switzerland

We investigate the effect of culture on corporate governance using the extraordinary opportunity that the corporate landscape of Switzerland provides. Within a single institutional framework (e.g., Swiss federal corporate law), we use language (German and French) and religion (Roman Catholicism and Protestantism) as proxies for culture. These groups share a distinct set of values particularly in their tolerance for hierarchical structures. We observe that firms in Swiss-French areas and firms in Roman Catholic cantons are more likely to have one-tier boards, whereas two-tier boards are more prevalent in Swiss-German areas and Protestant cantons. Furthermore, board composition is significantly driven by language. In contrast, ownership and equity structure are not significantly related to culture.