Trust, but Verify: MD&A Language and the Role of Trust in Corporate Culture
Robert Audi (),
Tim Loughran () and
Bill McDonald ()
Additional contact information
Robert Audi: University of Notre Dame
Tim Loughran: University of Notre Dame
Bill McDonald: University of Notre Dame
Journal of Business Ethics, 2016, vol. 139, issue 3, No 9, 561 pages
Abstract:
Abstract Trust is both ethically important and essential for business but difficult to measure. This paper contributes toward clarifying the nature of trust in a way that is both conceptually helpful for ethical inquiries concerning business and pertinent to the measurement of trust as an element in organizations. Several papers hypothesize that increasing the role of trust in a corporation reduces the need for external monitoring and contracts. Assessing this important hypothesis requires a way to gauge whether a firm has a trusting corporate culture. We develop an objective measure of trust in a firm’s corporate culture by counting the number of times 21 trust-related words appear in an important kind of document: the Management Discussion and Analysis section of the annual report. We report two significant findings: that, contrary to what one might think, firms with a trusting culture frequently use audit and control-type words and that trust is positively linked with subsequent share price volatility. We propose explanations of these findings with the hope of facilitating the objective measurement of trust and enhancement of a trusting atmosphere in corporate culture.
Keywords: Trust; Ethics; Corporate culture; Corporate governance; Audit; Disclosures; Textual analysis; Monitoring (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (25)
Downloads: (external link)
http://link.springer.com/10.1007/s10551-015-2659-4 Abstract (text/html)
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:kap:jbuset:v:139:y:2016:i:3:d:10.1007_s10551-015-2659-4
Ordering information: This journal article can be ordered from
http://www.springer. ... cs/journal/10551/PS2
DOI: 10.1007/s10551-015-2659-4
Access Statistics for this article
Journal of Business Ethics is currently edited by Michelle Greenwood and R. Edward Freeman
More articles in Journal of Business Ethics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().