Innovative or conservative? How clan culture shapes bank digital transformation in China

How culture affects banks’ digital transformation (BDT) is understudied. We discover that clan culture inhibits BDT in China. Clan culture’s short-radius trust requires banks to have more physical branches and employees to establish trust, and its risk aversion reduces banks’ willingness to bear risks, inhibiting BDT. Resource pooling within clans attenuates the financing constraints and reduces the credit demand of enterprises; households seek more credit through informal channels, limiting their reliance on bank loans and inhibiting BDT from the demand side. Developing the institutional environment and generalized trust as well as demographic change can attenuate these negative effects. Overall, we clarify how informal institutional factors inhibit BDT, enriching research on clan culture and modern financial development.