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Corporate Culture

Paper Session

Sunday, Jan. 6, 2019 10:15 AM - 12:15 PM

Hilton Atlanta, 205-206-207
Hosted By: American Finance Association
  • Chair: Jillian Grennan, Duke University

Measuring Corporate Culture Using Machine Learning

Kai Li
,
University of British Columbia
Feng Mai
,
Stevens Institute of Technology
Rui Shen
,
Nanyang Technological University
Xinyan Yan
,
University of Dayton

Abstract

Using one of the latest machine learning techniques—the word embedding model (Mikolov et al. 2013)—and 217,387 earnings call transcripts, we obtain five corporate cultural values: innovation, integrity, quality, respect, and teamwork (Guiso, Sapienza, and Zingales 2015) for 77,541 firm-year observations over the period 2001–2018. We conduct a large number of tests to validate our measures and demonstrate the advantages of our approach over several alternative methods. We show that corporate culture plays an important role in deal incidence and merger pairing, and that post-merger, acquirers’ cultural values are positively associated with their target firms’ cultural values pre-merger.

The Price of Hate: Household Finance and Non-Pecuniary Preferences

Barbara Bliss
,
University of San Diego
Joseph Engelberg
,
University of California-San Diego
Mitch Warachka
,
University of San Diego

Abstract

Airbnb hosts in college towns increase their listing prices more than hotels on home football games against rival teams. As a result of setting listing prices too high, rental income is approximately 30% lower. The overestimation of demand and the possibility of damage cannot explain the inverse relation between listing prices and rental incomes on games against rival teams. Instead, financial constraints are associated with hosts setting smaller listing price increases and earning higher rental incomes on rival games.

Control Rights and Corporate Sustainability Around the World

Alexander Dyck
,
University of Toronto
Karl Lins
,
University of Utah
Lukas Roth
,
University of Alberta
Mitch Towner
,
University of Arizona
Hannes Wagner
,
Bocconi University

Abstract

We break apart the traditional components of corporate sustainability–Environmental, Social, and Governance (ESG)–to examine the importance of outside investors’ control rights for firms’ environmental performance. Using a global sample, we find that giving outside investors greater control rights improves environmental performance. Better governance yields the largest environmental improvements when firms are widely held and control is contestable. Across all firms, we find a strikingly strong positive impact on environmental performance when a female board member is appointed. Family-controlled firms, where outsiders have limited influence, have lower environmental performance relative to other firms.

Hacking Corporate Reputations

Pat Akey
,
University of Toronto
Stefan Lewellen
,
Pennsylvania State University
Inessa Liskovich
,
University of Texas-Austin

Abstract

We exploit unexpected corporate data breaches to study how firms respond to negative reputation events. Data breaches negatively affect firm value by 10-20% following the event, and this effect lasts for years. However, consistent with a decline in corporate reputation reducing the value of a firm’s pre-existing corporate social responsibility (CSR) investments, we find that firms significantly increase their investment in CSR by an average of 0.4-0.5 standard deviations in the years following an unexpected breach. Our paper represents the first empirical study to directly link CSR to corporate reputations and presents the first evidence in the literature that firms actively invest in CSR as the result of a negative reputation shock.
Discussant(s)
Gordon Phillips
,
Dartmouth College
Samuel Hartzmark
,
University of Chicago
Laura Starks
,
University of Texas
Tracy Wang
,
University of Minnesota
JEL Classifications
  • G3 - Corporate Finance and Governance