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Corporate culture and discontinued operations

Author

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  • Li Sun

Abstract

Purpose - We investigate the relation between corporate culture and the likelihood of discontinuing business operations. Design/methodology/approach - We rely on regression analysis in our study. Findings - We find a significant negative relation, suggesting that firms with strong corporate culture are less likely to discontinue business operations. To enhance the incremental contributions of our study, we delve into the moderating role of corporate culture on the aforementioned relation and identify several factors that, when coupled with corporate culture, could indirectly impact the decision-making process regarding discontinuing operations. We also find that the negative relation between corporate culture and discontinued operations is mainly driven by firms with lower earnings performance, and this relation becomes stronger for high-tech firms. Lastly, we find that stronger culture is associated with a larger magnitude of discontinued operations for firms reporting discontinued operations, and this positive association is largely driven by firms reporting income-decreasing discontinued operations. Originality/value - Our analysis adds to two independent streams of research: corporate culture in management literature and discontinued operations in accounting literature. Prior research, in particular, focuses on examining if and how managers exploit discontinued operations to manipulate earnings. By showing a significant negative impact of corporate culture on the likelihood of discontinuing business operations, our research undoubtedly adds to the body of understanding regarding the factors that lead managers to discontinue certain operations.

Suggested Citation

  • Li Sun, 2025. "Corporate culture and discontinued operations," Asian Review of Accounting, Emerald Group Publishing Limited, vol. 33(3), pages 547-579, January.
  • Handle: RePEc:eme:arapps:ara-08-2023-0225
    DOI: 10.1108/ARA-08-2023-0225
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    More about this item

    Keywords

    Corporate culture; Discontinued operations; Business disposals; M40; M49; M54;
    All these keywords.

    JEL classification:

    • M40 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - General
    • M49 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Other
    • M54 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Labor Management

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