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Corporate culture and shareholder value in banking industry

Author Info

  • Carretta, Alessandro
  • Farina, Vincenzo
  • Fiordelisi, Franco
  • Schwizer, Paola

Abstract

This paper analyses the casual relationship between corporate culture and shareholder value using a sample of large banks in the French, German, Italian and U.K. banking systems over the 2000 to 2003 period. Firstly, we measure shareholder value using an Economic Value Added estimated through a procedure tailored to account for banking peculiarities. Secondly, we measure corporate culture using language as its particular artifact and developing a cultural survey based on the application of a text-analysis model to a corpus of reference texts produced by the sample of banks. We posit six hypotheses regarding the relationship between corporate culture and bank profits and shareholder value. Our results noticeably show that bank profits and shareholder value benefit from different orientations of banking corporate culture.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 8304.

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Date of creation: 2006
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Handle: RePEc:pra:mprapa:8304
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Find related papers by JEL classification:

  • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
  • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
  • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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  1. Eugene Fama & F. & Kenneth R. French, . "The Equity Premium."," CRSP working papers 522, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
  2. Barth, Mary E. & Beaver, William H. & Landsman, Wayne R., 2001. "The relevance of the value relevance literature for financial accounting standard setting: another view," Journal of Accounting and Economics, Elsevier, vol. 31(1-3), pages 77-104, September.
  3. Bartram, S.M., 2000. "Corporate Risk Management as a Lever for Shareholder Value Creation," Papers 00-58, Southern California - School of Business Administration.
  4. Dechow, Patricia M. & Hutton, Amy P. & Sloan, Richard G., 1999. "An empirical assessment of the residual income valuation model1," Journal of Accounting and Economics, Elsevier, vol. 26(1-3), pages 1-34, January.
  5. Fiordelisi, Franco, 2007. "Shareholder value efficiency in European banking," Journal of Banking & Finance, Elsevier, vol. 31(7), pages 2151-2171, July.
  6. Eric J. Van den Steen, 2009. "Culture Clash: The Costs and Benefits of Homogeneity," Harvard Business School Working Papers 10-003, Harvard Business School.
  7. Chu, Sing Fat & Lim, Guan Hua, 1998. "Share performance and profit efficiency of banks in an oligopolistic market: evidence from Singapore," Journal of Multinational Financial Management, Elsevier, vol. 8(2-3), pages 155-168, September.
  8. Elena Beccalli & Barbara Casu & Claudia Girardone, 2006. "Efficiency and Stock Performance in European Banking," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 33(1-2), pages 245-262.
  9. Wilderom, C.P.M. & van den Berg, P., 2000. "Firm Culture and Leadership as Firm Performance Predictors : a Resource-Based Perspective," Discussion Paper 2000-03, Tilburg University, Center for Economic Research.
  10. Robert A. Eisenbeis & Gary D. Ferrier & Simon H. Kwan, 1999. "The informativeness of stochastic frontier and programming frontier efficiency scores: Cost efficiency and other measures of bank holding company performance," FRB Atlanta Working Paper 99-23, Federal Reserve Bank of Atlanta.
  11. van der Wiele, A. & Boselie, J.P.P.E.F. & Hesselink, M., 2001. "Empirical Evidence for the Relation between Customer Satisfaction and Business Performance," ERIM Report Series Research in Management ERS-2001-32-ORG, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
  12. Dennis G. Uyemura & Charles C. Kantor & Justin M. Pettit, 1996. "Eva® For Banks: Value Creation, Risk Management, And Profitability Measurement," Journal of Applied Corporate Finance, Morgan Stanley, vol. 9(2), pages 94-109.
  13. Gerald T. Garvey & Todd T. Milbourn, 2000. "EVA versus Earnings: Does it Matter which is More Highly Correlated with Stock Returns?," Claremont Colleges Working Papers 2000-52, Claremont Colleges.
  14. Carretta, Alessandro & Farina, Vincenzo & Schwizer, Paola, 2005. "Banking regulation towards advisory: the “culture compliance” of banks and supervisory authorities," MPRA Paper 8302, University Library of Munich, Germany.
  15. Holthausen, Robert W. & Watts, Ross L., 2001. "The relevance of the value-relevance literature for financial accounting standard setting," Journal of Accounting and Economics, Elsevier, vol. 31(1-3), pages 3-75, September.
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Cited by:

  1. Gary Gorton, 2015. "Stress for Success: A Review of Timothy Geithner's Financial Crisis Memoir," Journal of Economic Literature, American Economic Association, vol. 53(4), pages 975-95, December.
  2. Fiordelisi, Franco & Molyneux, Phil, 2010. "Total factor productivity and shareholder returns in banking," Omega, Elsevier, vol. 38(5), pages 241-253, October.

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