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Corporate Culture and Investment–Cash Flow Sensitivity

Author

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  • Fuxiu Jiang

    (Renmin University of China)

  • Kenneth A. Kim

    (Tongji University
    State University of New York at Buffalo)

  • Yunbiao Ma

    (Renmin University of China)

  • John R. Nofsinger

    (University of Alaska Anchorage)

  • Beibei Shi

    (University of International Business and Economics)

Abstract

Can firms overcome credit constraints with a corporate culture of high integrity? We empirically address this question by studying their investment–cash flow sensitivities. We identify firms with a culture of integrity through textual analysis of public documents in a sample of Chinese listed firms and also through corporate culture statements. Our results show that firms with an integrity-focused culture have lower investment–cash flow sensitivity, even after we address endogeneity concerns. However, we also find that for the culture to reduce the investment–cash flow sensitivity, external stakeholders must be able to verify this culture through a low information asymmetry environment. Overall, our findings show that a corporate culture of high integrity can mitigate a firm’s external transaction costs.

Suggested Citation

  • Fuxiu Jiang & Kenneth A. Kim & Yunbiao Ma & John R. Nofsinger & Beibei Shi, 2019. "Corporate Culture and Investment–Cash Flow Sensitivity," Journal of Business Ethics, Springer, vol. 154(2), pages 425-439, January.
    • Handle: RePEc:kap:jbuset:v:154:y:2019:i:2:d:10.1007_s10551-017-3444-3
    DOI: 10.1007/s10551-017-3444-3
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    Cited by:

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    3. Kilvia Cristina Amaral da Luz & Nayane Thais Krespi Musial, 2023. "Can Organizational Culture Encourage Corporate Social Responsibility and Improve Environmental Performance in [B]³ Companies?," Journal of Management and Sustainability, Canadian Center of Science and Education, vol. 13(1), pages 215-215, July.
    4. Changling Sun & Zixi Zhang & Marek Vochozka & Iveta Vozòáková, 2022. "Enterprise digital transformation and debt financing cost in China’s A-share listed companies," Oeconomia Copernicana, Institute of Economic Research, vol. 13(3), pages 783-829, September.
    5. Yi, Er, 2023. "Corporate governance, information disclosure and investment - Cash flow sensitivity," Finance Research Letters, Elsevier, vol. 55(PB).
    6. Changling Sun & Ziang Lin & Marek Vochozka & Zuzana Vincúrová, 2022. "Digital transformation and corporate cash holdings in China’s A-share listed companies," Oeconomia Copernicana, Institute of Economic Research, vol. 13(4), pages 1081-1116, December.

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