Corporate Culture: Evidence from the Field

87 Pages Posted: 9 Jul 2016 Last revised: 11 Oct 2018

See all articles by John R. Graham

John R. Graham

Duke University; National Bureau of Economic Research (NBER)

Jillian Grennan

Duke University - Fuqua School of Business; Duke Innovation & Entrepreneurship Initiative

Campbell R. Harvey

Duke University - Fuqua School of Business; National Bureau of Economic Research (NBER); Duke Innovation & Entrepreneurship Initiative

Shivaram Rajgopal

Columbia Business School

Multiple version iconThere are 2 versions of this paper

Date Written: October 10, 2018

Abstract

Does corporate culture matter? Can differences in corporate culture explain why similar firms diverge, with one succeeding and the other failing? To address these difficult questions, we conduct a novel survey and interview-based analysis of 1,348 North American firms. Over half of senior executives believe that corporate culture is a top-three driver of firm value and 92% believe that improving culture would increase their firm's value. Surprisingly, only 16% of executives believe their corporate culture is where it should be. Executives also link culture to ethical choices (compliance, short-termism), innovation (creativity, taking appropriate risk), and value creation (productivity, acquisition premia). For example, 85% believe a poorly implemented, ineffective culture increases the chance that an employee might act unethically or even illegally. We assess these links within a framework that implies cultural effectiveness depends on interactions between cultural values, norms, and formal institutions.

See our related paper: Corporate Culture: The Interview Evidence.

Keywords: Corporate Culture, Values, Norms, Leadership, Corporate Governance, Incentive Compensation, Informal Institutions, Intangible Assets, Valuation, Finance, Risk-taking, Short-termism, Myopia, Innovation, Firm Value, Productivity, M&A valuation, Integrity, Trust, Ethics, Compliance, Earnings Management

JEL Classification: G3, Z1, D23, G23, G30, K22, M14, O16

Suggested Citation

Graham, John Robert and Grennan, Jillian and Harvey, Campbell R. and Rajgopal, Shivaram, Corporate Culture: Evidence from the Field (October 10, 2018). 27th Annual Conference on Financial Economics and Accounting Paper; Duke I&E Research Paper No. 2016-33; Columbia Business School Research Paper No. 16-49. Available at SSRN: https://ssrn.com/abstract=2805602 or http://dx.doi.org/10.2139/ssrn.2805602

John Robert Graham

Duke University ( email )

Box 90120
Durham, NC 27708-0120
United States
919-660-7857 (Phone)
919-660-8030 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Jillian Grennan

Duke University - Fuqua School of Business ( email )

Box 90120
Durham, NC 27708-0120
United States

Duke Innovation & Entrepreneurship Initiative ( email )

215 Morris St., Suite 300
Durham, NC 27701
United States

Campbell R. Harvey (Contact Author)

Duke University - Fuqua School of Business ( email )

Box 90120
Durham, NC 27708-0120
United States
919-660-7768 (Phone)
919-660-8030 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Duke Innovation & Entrepreneurship Initiative ( email )

215 Morris St., Suite 300
Durham, NC 27701
United States

Shivaram Rajgopal

Columbia Business School ( email )

3022 Broadway
New York, NY 10027
United States

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