The impact of corporate culture on stock price crash risk: a firm-level analysis

Mengjiao Chen, Jinjuan Ren () and Jingying Zhao

International Journal of Accounting & Information Management, 2023, vol. 32, issue 1, 1-18

Abstract: Purpose - This paper aims to investigate the impact of corporate culture on stock price crash risk and explore the underlying mechanisms. Design/methodology/approach - This paper uses a novel firm-level culture measure of Liet al.(2020), which evaluates corporate culture from the perspectives of integrity, teamwork, innovation, respect and quality. Using a sample of 4,017 US firms from 2001 to 2018, this paper uses panel data regressions to explore the impact of corporate culture on stock price crash risk. Findings - This paper finds that among five cultural dimensions, integrity reduces crash risk and quality increases crash risk. The mitigating effect of integrity culture on crash risk is concentrated among firms with a strong incentive or ability to hoard bad news. The exacerbating effect of quality culture on crash risk is concentrated among firms with low managerial flexibility. Social implications - This paper helps investors and regulators to understand the determinants of stock price crash risk, which facilitates investors’ wealth management and stabilizes social welfare. Originality/value - To the best of the authors’ knowledge, this is the first study that uses time-varying firm-level measure of corporate culture to investigate its impact on stock price crash risk, contributing to the literature on the determinants of crash risk. Besides, this is the first study that explores the possible mechanism of managerial flexibility in influencing stock price crash risk.

Keywords: Corporate culture; Integrity; Quality; Stock price crash risk; Bad-news hoarding; Managerial flexibility; G12; G32; M14 (search for similar items in EconPapers)
Date: 2023
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)
Access to full text is restricted to subscribers

Related works:
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:eme:ijaimp:ijaim-04-2023-0095

DOI: 10.1108/IJAIM-04-2023-0095

Access Statistics for this article

International Journal of Accounting & Information Management is currently edited by Dr Xin (Robert) Luo and Professor Han Donker

More articles in International Journal of Accounting & Information Management from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().