62 Pages Posted: 11 Mar 2016 Last revised: 1 Jul 2016
Date Written: June 28, 2016
We develop a new measure of integrity as it relates to corporate culture - the number of employees who use corporate emails to register for a website that facilitates extramarital affairs. This measure is associated with firm-level unethical behavior: it predicts a greater probability of SEC enforcement actions for accounting misstatements, and lower corporate ethics ratings by external analysts. However, consistent with research in psychology, we find that the measure also predicts more innovation (R&D intensity, successful patenting rates, subsequent patent citations, and patent diversity) and risk-taking (leverage, volatility, probability of default). Our results suggest that it is difficult to engineer a perfect corporate culture due to potential trade-offs between employee creativity, risk-taking, and integrity.
Keywords: Corporate culture, Integrity, Creativity, R&D
JEL Classification: M14, G03
Suggested Citation: Suggested Citation
Grieser, William David and Kapadia, Nishad and Li, Rachel and Simonov, Andrei, Fifty Shades of Corporate Culture (June 28, 2016). Available at SSRN: https://ssrn.com/abstract=2741049