Tournament Culture and Corporate Misconduct : Evidence using Machine Learning

63 Pages Posted: 2 Dec 2020

See all articles by Jitendra Aswani

Jitendra Aswani

Fordham University

Franco Fiordelisi

University of Rome III - Department of Business Studies; Middlesex University - Business School

Date Written: October 9, 2020

Abstract

This paper examines the type of firm culture which leads to corporate misconduct activities. Using the management’s tone in the 10-K report as a proxy for culture, we find that higher internal “compete” culture (aka tournament culture) increases the firm specific risk and hence, such a corporate culture is associated with corporate misconduct activities such as restatements, earnings management, and accounting fraud. The results are robust to external validity tests, firm-specific systematic risk, market competition, governance characteristics, CEO effects, and endogeneity concerns.

Keywords: Corporate Culture; Firm Risk; Corporate Misconduct; Text Analysis

JEL Classification: M14, D22

Suggested Citation

Aswani, Jitendra and Fiordelisi, Franco, Tournament Culture and Corporate Misconduct : Evidence using Machine Learning (October 9, 2020). Available at SSRN: https://ssrn.com/abstract=3708313 or http://dx.doi.org/10.2139/ssrn.3708313

Jitendra Aswani (Contact Author)

Fordham University ( email )

113 West 60th Street
Bronx, NY 10458
United States
9176055492 (Phone)

Franco Fiordelisi

University of Rome III - Department of Business Studies ( email )

Via Silvio D'Amico 77
Via Silvio D'Amico 77
Rome, RM 00145
Italy

HOME PAGE: http://host.uniroma3.it/docenti/fiordelisi/?home

Middlesex University - Business School ( email )

The Burroughs
London, NW4 4BT
United Kingdom

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