Corporate Culture and Financial Reporting Risk: Looking Through the Glassdoor

49 Pages Posted: 4 Apr 2017 Last revised: 31 Mar 2022

See all articles by Yuan Ji

Yuan Ji

The University of Texas at Arlington

Oded Rozenbaum

George Washington University - School of Business

Kyle Welch

George Washington University; George Washington University - Department of Accountancy

Date Written: June 1, 2017

Abstract

We study whether financial reporting risk is associated with job satisfaction, company culture, and opinions of senior leadership. We use novel data on employees’ perspectives obtained from the website Glassdoor, covering 14,282 firm-years in the period 2008-2015. We argue that poorly implemented performance objectives leads to pressure and creates a boiler room effect, negatively impacting the corporate climate of the firm and increasing the propensity to manipulate performance metrics. We find that firms with lower levels of job satisfaction (as measured by employees) and lower levels of “culture and values” are more likely to be subjected to SEC fraud enforcement actions and securities class action lawsuits. We also find that the association between firms’ culture and financial reporting risk is stronger for firms with weaker board independence. Thus, the work environment, as perceived by employees, appears to play a critical role in financial reporting risk.

Keywords: corporate culture, culture, fraud, SEC, employee feedback, job satisfaction, Glassdoor, financial reporting, governance

JEL Classification: M14, M12, M54, M41

Suggested Citation

Ji, Yuan and Rozenbaum, Oded and Welch, Kyle, Corporate Culture and Financial Reporting Risk: Looking Through the Glassdoor (June 1, 2017). Available at SSRN: https://ssrn.com/abstract=2945745 or http://dx.doi.org/10.2139/ssrn.2945745

Yuan Ji

The University of Texas at Arlington ( email )

701 S. West Street
Room 409
arlington, TX TX 76010
United States

Oded Rozenbaum

George Washington University - School of Business ( email )

Washington, DC 20052
United States
202-994-5992 (Phone)

Kyle Welch (Contact Author)

George Washington University ( email )

School of Business and Public Management
Washington, DC 20052
United States

HOME PAGE: http://https://business.gwu.edu/kyle-welch

George Washington University - Department of Accountancy ( email )

School of Business and Public Management
Washington, DC 20052
United States

HOME PAGE: http://https://business.gwu.edu/kyle-welch

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
3,187
Abstract Views
12,742
rank
5,610
PlumX Metrics