Essays on the Role of Corporate Culture in Accounting and Finance

Economists have traditionally used property rights theory and agency theory to rationalize and explain corporate outcomes. The influence of this line of thought cannot be overemphasized, and the principal-agent framework has profoundly shaped our perspective on managerial and corporate behavior. While the premise of this framework has helped to explain economic outcomes by specifying how property rights influence corporate behavior within the realm of agency conflicts, it marginalizes much of the social nature of the firm. This underscores that socio-organizational factors deserve more attention in economics and that mental constructs such as corporate culture must be explored to advance our understanding of corporate behavior. This dissertation contributes to this effort and introduces three essays that utilize accounting information to examine the financial and non-financial implications of corporate culture through the lens of various stakeholders.
The first essay focuses on employees and examines the link between corporate culture and workplace safety. The results show that firms with strong corporate cultures record lower regulatory fines, are less likely to be penalized, and sustain fewer safety-related violations. Additional analyses of establishment-level data from the United States Occupational Safety and Health Administration also reveal lower levels of workplace injuries and illnesses in firms with stronger corporate cultures. A potential economic explanation for these patterns is documented by connecting firms with a strong corporate culture to safety-related spending.
The second essay seeks to understand how corporate values and norms affect knowledge-intensive corporate activities and focus on tax planning in firms with control and collaboration-oriented corporate cultures. The results show that firms with collaboration-oriented (control-oriented) corporate cultures record lower (higher) tax burdens over short and long time horizons. Additional tests uncover that firms with collaboration-oriented corporate cultures achieve these tax savings by engaging in tax-sheltering activities and that such savings positively affect firm value. No evidence of equivalent behavior is recorded in firms with control-oriented corporate cultures.
The third essay explores how corporate culture shapes the role of the supplier in the context of interfirm financing and focuses on trade credit provision in firms with control, collaboration, creativity, and competition-oriented cultures. The results show that firms with control and competition-oriented corporate cultures extend more trade credit to customers, while the opposite pattern partly applies to firms with collaboration and creativity-oriented corporate cultures. Additional analyses reveal that firms with control and competition-oriented corporate cultures extend more trade credit during different economic circumstances and that such policies affect firm performance.
A central theme across these essays is the application of natural language processing techniques to explore how social aspects of the firm affect corporate outcomes that have financial and non-financial implications for several primary stakeholders. This work adds to the literature on the intersection of corporate governance, behavioral corporate finance, and organizational behavior by shedding light on how corporate culture influences workplace safety, tax planning, and trade credit policies in publicly listed firms.