Measuring Corporate Culture Using Machine Learning
102 Pages Posted: 21 Oct 2018
Date Written: May 26, 2020
We create a culture dictionary using one of the latest machine learning techniques—the word embedding model (Mikolov et al. 2013)—and 209,480 earnings call transcripts. We obtain scores of the five top corporate cultural values proposed by Guiso, Sapienza, and Zingales (2015): innovation, integrity, quality, respect, and teamwork for 62,664 firm-year observations over the period 2001–2018. We show that corporate culture correlates with business outcomes, including operational efficiency, risk-taking, earnings management, executive compensation design, firm value, and deal making. We also present suggestive evidence that corporate culture is shaped by major corporate events such as mergers and acquisitions.
Keywords: machine learning; word embedding; semi-supervised learning; corporate culture; cultural fit; acculturation; mergers and acquisitions
JEL Classification: C45; G34
Suggested Citation: Suggested Citation