Survival of the Fittest? Managerial Cultural Fit and Tenure
63 Pages Posted: 12 Jan 2022 Last revised: 9 Mar 2022
Date Written: March 8, 2022
I create proxies for managers' cultural fit using one of the latest machine learning technologies – the sentence embedding model - by analysing 11.5 million speeches in earnings calls. A better cultural fit is significantly and positively correlated with managerial tenure. I demonstrate that the effect of cultural fit on managerial tenure is causal using random survival forests. Firms that hire culturally disruptive managers have lower future market values and performance. The stock market reacts positively to signals that indicate low cultural dispersion within the firm.
Keywords: Corporate Culture, Manager Turnover, Natural-Language-Processing, Machine Learning, BERT, Transformer, Survival Analysis, Causal Machine Learning
JEL Classification: C45, G30
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