Summary:
Corporate culture is widely believed to have a significant impact on an organization's performance. It plays a crucial role in shaping corporate identity and improving business performance. Corporate culture encompasses shared values, beliefs, and behaviors that define appropriate behavior by employees. Recent studies show that corporate culture increases resilience to stock price changes and enhances firm performance in crises. Considering the importance of corporate culture, we seek to investigate corporate culture in China and its financial and economic outcomes. However, corporate culture is subjective and nebulous and lacks an authoritative and convincing definition. Fortunately, the development of big data and machine learning algorithms makes identifying and measuring the strength of corporate culture possible. Using the k-means model, we identify the five most mentioned values from the descriptions of firm values on firms' official webpages and use them to define corporate culture, namely, “integrity,” “innovation,” “hardworking,” “quality,” and “teamwork.” Next, we use the word embedding model to create dictionaries for these values and quantify the strength of corporate culture using annual report textual data. Financial constraints are a key factor hindering Chinese enterprises' development. Informal financing sources such as trade credit are effective supplementary systems that can alleviate financing issues. Considering the high dependence, informational opacity, and weak regulation that characterize trade credit in China, we focus on how corporate culture influences access to informal financing. We propose that corporate culture is an important strategic “soft asset” for firms and an effective complement to other characteristics in helping firms obtain trade credit. We propose three channels through which corporate culture influences trade credit access. First, the “integrity” and “hardworking” corporate culture values advocate that employees abide by contracts and commitments, fulfill their obligations, and thereby earn respect, enhance their reputation, and gain trust from creditors. Second, the “innovation” and “teamwork” values emphasize long-term development strategies and induce suppliers or customers to maintain good relationships by providing trade credit, aiming to share business growth in the future. Finally, companies that attach considerable importance to product quality have a strong cultural emphasis on the “quality” value and are inclined to use trade credit to supervise the quality of suppliers' products, thereby improving the overall level of trade credit. In empirical analyses, we focus on data from Chinese A-share listed companies over the 2012-2021 period. We collect textual data from the Management's Discussion and Analysis section of companies' annual reports and obtain financial data from the China Stock Market and Accounting Research database. The results of our empirical analyses demonstrate that a strong corporate culture helps companies obtain more trade credit than those lacking such a culture, and that all five dimensions contribute to this effect. This conclusion holds after a series of robustness checks. For the endogeneity issue, we use a two-stage least squares model with two instrumental variables. In a difference-in-differences regression, we use the abnormal departure of the chairperson of the board or CEO as an exogenous shock in a quasi-natural experiment. The results confirm our main findings. The results of the mechanism analyses indicate that companies with stronger corporate cultures have lower levels of credit risk and higher potential for future development than companies with weaker cultures. In addition, these companies pay more attention to product quality and rely more on trade credit to supervise the quality of their suppliers' products than their counterparts. The results of further analysis show that the effect of corporate culture is more significant in firms with lower information transparency and those located in regions with lower social trust levels and poorer business environments than in other firms. This article makes three main contributions. First, it introduces a method for measuring the strength of corporate culture in the Chinese setting. Second, by accommodating the unique characteristics of Chinese firms, this article explores the cultural dimensions of most concern for listed companies, enabling a comprehensive study of corporate culture in China. Third, this research enriches the literature on the factors that influence access to trade credit and provides evidence of the positive role of a strong corporate culture in obtaining trade credit, thus offering a new perspective on how companies can alleviate financing constraints.
华秀萍, 程思睿, 李婉宁, 王勇. 非正式融资中的文化力量 ——企业文化对商业信用的影响[J]. 金融研究, 2023, 521(10): 186-206.
HUA Xiuping, CHENG Sirui, LI Wanning, WANG Yong. The Power of Culture over Informal Financing —The Impact of Corporate Culture on Trade Credit Access by Chinese Listed Firms. Journal of Financial Research, 2023, 521(10): 186-206.
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