Corporate Culture and Financial Reporting Quality

Accounting Horizons, 36(1), 1-24, 2022. https://doi.org/10.2308/HORIZONS-19-003

59 Pages Posted: 8 Jun 2022 Last revised: 17 May 2023

See all articles by Avishek Bhandari

Avishek Bhandari

University of Wisconsin Whitewater

Babak Mammadov

Clemson University - School of Accountancy & Legal Studies

Maya Thevenot

Florida Atlantic University

Hamid Vakilzadeh

University of Wisconsin - Whitewater - College of Business and Economics

Date Written: May 25, 2022

Abstract

With the increased focus on corporate culture as an important determinant of organizational behavior and outcomes, we study how corporate culture affects firm financial reporting quality. Relying on the Competing Values Framework (CVF) to define four types of corporate culture, we find that collaboration (competition)-oriented culture firms have lower (higher) financial reporting quality and these effects are incremental to corporate governance and tone at the top. Further analyses support our main findings and suggest that collaboration culture is associated with the likelihood of reporting a material internal control weakness, while competition culture is related to a lower likelihood of an internal control weakness and a restatement. We contribute to the “cultural revolution” led by economics and finance schools of thought and provide empirical evidence that corporate culture shapes financial reporting quality.

Keywords: corporate culture, competing-values framework, financial reporting quality, earnings management, restatements

JEL Classification: M14, M41, M40

Suggested Citation

Bhandari, Avishek and Mammadov, Babak and Thevenot, Maya and Vakilzadeh, Hamid, Corporate Culture and Financial Reporting Quality (May 25, 2022). Accounting Horizons, 36(1), 1-24, 2022. https://doi.org/10.2308/HORIZONS-19-003, Available at SSRN: https://ssrn.com/abstract=4119873 or http://dx.doi.org/10.2139/ssrn.4119873

Avishek Bhandari (Contact Author)

University of Wisconsin Whitewater ( email )

Whitewater, WI 53190
United States

Babak Mammadov

Clemson University - School of Accountancy & Legal Studies ( email )

Clemson, SC 29634
United States

Maya Thevenot

Florida Atlantic University ( email )

University Tower
220 SE 2 Avenue
Boca Raton, FL 33431
United States

Hamid Vakilzadeh

University of Wisconsin - Whitewater - College of Business and Economics ( email )

Whitewater, WI 53190
United States

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
412
Abstract Views
1,003
Rank
131,867
PlumX Metrics