This book introduces a measure of firms’ competition culture based on a textual analysis and natural language processing (NPL) of firms’ 10-K filings. Using this measure, the book explores the relationship between competition culture and various phenomena in corporate finance, specifically, institutional ownership structure, stock return performance, idiosyncratic stock price crash risk, meeting/beating analysts’ earnings expectations, and earnings management activity, for a large sample of US-based financial and non-financial firms. In particular, the book provides evidence that transient institutional ownership intensifies firms’ competition culture, while dedicated institutional ownership lessens it. In addition, the book’s findings suggest that firms with greater levels of competition culture achieve higher levels of short-term stock return performance, experience greater incidence of idiosyncratic stock price crashes, and are more prone to meet/beat analysts forecast and engage in accruals-based earnings manipulation.
Finally, the book examines the role played by competition culture in financial firms (i.e., banks). Specifically, the book explores the effect of competition culture on bank lending and shows that banks with greater levels of competition culture are generally more prone to engage in procyclical lending activity. The findings of the book have significant policy implications and will be of interests to regulators, accounting standard-setters, managers and those charged with firm governance, career academics and researchers, graduates, and those generally interested in the role played by corporate culture in the related fields of finance, economics, and accounting.
Author(s): Terry Harris
Publisher: Palgrave Macmillan
Year: 2023
Language: English
Pages: 259
City: Cham
Contents
List of Figures
List of Tables
1 Introduction
1.1 Introduction
References
2 Literature Review: What Is Culture?
2.1 Introduction
2.2 Corporate Culture
2.2.1 Taxonomies of Corporate Culture
2.2.1.1 Handy (1976)
2.2.1.2 Deal and Kennedy (1982)
2.2.1.3 Reynolds (1986)
2.2.1.4 The Cultural Web
2.2.1.5 Denison (1990)
2.2.1.6 O’Reilly et al. (1991, 1996, 2014)
2.2.1.7 Schein (1990, 1992)
2.2.1.8 Hofstede (2011)
2.2.1.9 The Competing Values Framework
2.2.2 Implications of Corporate Culture for Finance
2.2.2.1 Performance
2.2.2.2 Firm Value
2.2.2.3 Earnings Manipulation
2.2.2.4 Bank Behaviour
2.2.2.5 Mergers and Acquisitions
2.3 Summary
References
3 Literature Review: What Is Textual Analysis, and Can We Use It to Measure Corporate Culture?
3.1 Introduction
3.2 Textual Analysis Techniques and Applications
3.2.1 Lexicon-Based Approaches
3.2.1.1 Readability
3.2.1.2 Dictionary Methods
3.2.2 Statistical Learning Approaches
3.2.2.1 Naïve Bayes
3.2.2.2 Semantic Analysis
3.2.2.3 Similarity Analysis
3.3 Can Textual Analysis Be Used to Measure Corporate Culture?
3.4 Summary
References
4 Institutional Investors and Competition Culture
4.1 Introduction
4.2 Measurement and Hypotheses
4.2.1 Measuring Competition Culture
4.2.2 Hypotheses
4.3 Data, Variables, and Sample Selection
4.3.1 Data
4.3.2 Measuring Institutional Ownership
4.3.3 Control Variables
4.3.4 Descriptive Statistics and Correlations
4.4 Empirical Results
4.5 Summary
References
5 Competition Culture and Performance
5.1 Introduction
5.2 Hypotheses
5.3 Data, Variables, and Sample
5.3.1 Data
5.3.2 Measuring Competition Culture
5.3.3 Measuring Short-Term Performance
5.3.4 Control Variables
5.3.5 Descriptive Statistics and Correlations
5.4 Empirical Results
5.4.1 Competition Culture and Firm’s Short-Term Performance
5.5 Summary
References
6 Competition Culture and Crash Risk
6.1 Introduction
6.2 Hypotheses
6.3 Data, Variables and Sample
6.3.1 Data
6.3.2 Measuring Competition Culture
6.3.3 Measuring Stock Price Crash Risk
6.3.4 Measuring Institutional Ownership
6.3.5 Control Variables
6.3.6 Descriptive Statistics and Correlations
6.4 Empirical Results
6.4.1 Competition Culture and Stock Price Crash Risk
6.4.2 Does Competition Culture Mediate the Relationship between Institutional Ownership and Stock Price Crash Risk?
6.5 Summary
References
7 Competition Culture and Meeting/Beating Analysts’ Earnings Forecasts
7.1 Introduction
7.2 Hypotheses
7.3 Data, Variables, and Sample
7.3.1 Data
7.3.2 Measuring Competition Culture
7.3.3 Measuring Meeting/Beating Earnings Forecasts
7.3.4 Control Variables
7.3.5 Descriptive Statistics and Correlations
7.4 Empirical Results
7.4.1 Competition Culture and Meeting/Beating Earnings Forecast
7.5 Summary
References
8 Competition Culture and Earnings Management
8.1 Introduction
8.2 Hypotheses
8.3 Data, Variables, and Sample
8.3.1 Data
8.3.2 Measuring Competition Culture
8.3.3 Measuring Accrual Earnings Management
8.3.4 Measuring Real Earnings Management
8.3.5 Control Variables
8.3.6 Descriptive Statistics and Correlations
8.4 Empirical Results
8.4.1 Competition Culture and Earnings Management
8.4.2 Instrumental Variable Regressions
8.4.3 Heckman Two-Stage Self-Selection Model
8.5 Summary
References
9 Competition Culture and Bank Lending
9.1 Introduction
9.2 Hypotheses
9.3 Data, Variables, and Sample
9.3.1 Data
9.3.2 Measuring Bank Competition Culture
9.3.3 Measuring Bank Lending
9.3.4 Control Variables
9.3.5 Descriptive Statistics and Correlations
9.4 Empirical Results
9.4.1 Bank Competition Culture and Bank Lending Behaviour
9.4.2 Bank Competition Culture and Procyclicality
9.5 Summary
References
10 Conclusion
10.1 Overview and Concluding Remarks
References
Appendix A: Institutional Investors and Competition Culture
Overview
Measuring Competition Culture
Is Our Measure of Competition Culture Valid?
Competition Culture and Product Market Competition
Appendix B: Competition Culture and Crash Risk
Overview
Appendix C: Competition Culture and Bank Lending
Overview
References
Index
