The Impact of Corporate Culture on Performance: A Quasi-Quantitative Approach

Abstract

We propose a quasi-quantitative approach to measure corporate culture. Using this new measure, we document evidence that the positive correlation between corporate culture and performance is valid in terms of stock return, return on asset, cash flows, earnings growth, sales growth, return on sales, and turnover; corporate culture also helps to lower the negative impact of missing earnings benchmarks. With respect to earnings management and operational risk, we find that corporate culture and performance are negatively correlated. Essentially, our comprehensive analysis, which uses an alternative measure of corporate culture and performance in a sample of Chinese firms, is consistent with the literature. Therefore, our alternative measure of corporate culture is valid.

Keywords: corporate culture; performance; China

JEL Classification: G00