Does Corporate Culture Matter for Firm Policies?

Henrik Cronqvist, Angie Low and Mattias Nilsson
Additional contact information
Angie Low: The Ohio State Unversity
Mattias Nilsson: Worcester Polytechnic Institute

No 48, SIFR Research Report Series from Institute for Financial Research

Abstract: Economic theories suggest that a firm's corporate culture matters for its policy choices. We construct a parent-spinoff firm panel dataset that allows us to identify culture effects in firm policies from behavior that is inherited by a spinoff firm from its parent after the firms split up. We find positive and significant relations between spinoff firms' and their parents' choices of investment, financial, and operational policies. Consistent with predictions from economic theories of corporate culture, we find that the culture effects are long-term and stronger for internally grown business units and older firms. Our evidence also suggests that firms preserve their cultures by selecting managers who fit into their cultures. Finally, we find a strong relation between spinoff firms' and their parents' profitability, suggesting that corporate culture ultimately also affects economic performance. These results are robust to a series of robustness checks, and cannot be explained by alternatives such as governance or product market links. The contribution of this paper is to introduce the notion of corporate culture in a formal empirical analysis of firm policies and performance.

Keywords: Economics of corporate culture; firm policies; firm performance (search for similar items in EconPapers)
JEL-codes: G32 G34 G35 L22 L25 Z10 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2007-02-15
New Economics Papers: this item is included in nep-bec
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
http://www.sifr.org/PDFs/sifr-wp48.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found

Related works:
Working Paper: Does Corporate Culture Matter for Firm Policies? (2007)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hhs:sifrwp:0048

Access Statistics for this paper

More papers in SIFR Research Report Series from Institute for Financial Research Institute for Financial Research Drottninggatan 89, SE-113 60 Stockholm, Sweden. Contact information at EDIRC.
Bibliographic data for series maintained by Anki Helmer ().