Corporate culture and investment inefficiency

Md Noman Hossain, Monika K. Rabarison and Chiquan Guo

International Review of Financial Analysis, 2024, vol. 96, issue PB

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 (search for similar items in EconPapers)
JEL-codes: G31 G41 M14 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:96:y:2024:i:pb:s1057521924006689

DOI: 10.1016/j.irfa.2024.103736

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