Corporate Culture and Firm Value: Evidence from Crisis

Abstract

Measuring company culture in four types (collaborate, control, compete, and create) using 10-K text, we examine the role of culture in firm stability. We find that firms with higher controlling culture fared significantly better during the 2008-09 crisis. The results are robust to using alternative measures of firm performance and examining alternative crisis episodes. Firms with stronger controlling culture experienced fewer layoffs, less negative asset growth, greater debt issuance, and increased access to credit-line facilities during the crisis. The positive valuation effect of controlling culture is stronger among financially-constrained firms. Overall, the controlling culture improves firm stability through greater support from capital providers.

Keywords: Corporate culture, Competing Values Framework, Textual analysis, Financial crisis, Abnormal returns, Stability

JEL Classification: G01, M14