Corporate culture and financial statement comparability

Mansoor Afzali

Advances in accounting, 2023, vol. 60, issue C

Abstract: In this paper, I empirically examine the influence of corporate culture on the comparability of financial statements. I predict that firms with strong corporate cultures have less-opportunistic managers, who make homogenous decisions when faced with similar economic events, resulting in greater accounting comparability. For a sample of U.S. companies, I find empirical evidence consistent with this prediction: firms with strong corporate cultures have greater peer- and industry-level comparability. These results are robust to using an entropy-balanced sample, correcting for sample selection bias using Heckman's two-step procedure, and employing different measures of corporate culture strength. Further analysis reveals that sudden CEO turnovers that move firms towards (away from) a stronger corporate culture positively (negatively) influence post-turnover accounting comparability. My results provide new insights on the role of corporate culture for financial reporting.

Keywords: Corporate culture; Financial statement comparability (search for similar items in EconPapers)
JEL-codes: M14 M41 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:advacc:v:60:y:2023:i:c:s0882611022000591

DOI: 10.1016/j.adiac.2022.100640

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