Corporate Culture and Investment Inefficiency

67 Pages Posted: 7 Mar 2024

See all articles by Md Noman Hossain

Md Noman Hossain

Central Washington University - College of Business

Monika K. Rabarison

The University of Texas Rio Grande Valley

Chiquan Guo

The University of Texas Rio Grande Valley

Abstract

Using an aggregate measure of corporate culture, we find that firms with stronger corporate culture encounter lower investment inefficiency. We show that reducing information asymmetry or engaging in tax avoidance are two potential channels through which corporate culture reduces investment inefficiency. Further analyses reveal that the aforementioned relationship is more pronounced for firms with lower local religiosity, firms with less corporate social responsibility engagement, and financially unconstrained firms. Overall, our findings contribute to the literature stressing the importance of corporate culture for corporate decisions and outcomes, and hence, for adding value.

Keywords: Corporate Culture, Investment Inefficiency, Overinvestment, Underinvestment, firm value

Suggested Citation

Hossain, Md Noman and Rabarison, Monika and Guo, Chiquan, Corporate Culture and Investment Inefficiency. Available at SSRN: https://ssrn.com/abstract=4751077 or http://dx.doi.org/10.2139/ssrn.4751077

Md Noman Hossain

Central Washington University - College of Business ( email )

Ellensburg, WA 98926
United States

Monika Rabarison (Contact Author)

The University of Texas Rio Grande Valley ( email )

1201 W. University Dr.
Edinburg, TX 78539
United States

Chiquan Guo

The University of Texas Rio Grande Valley ( email )

1201 West University Dr.
Edinburg, TX 78539
United States

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