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Journal of Business Ethics

, Volume 154, Issue 2, pp 425–439 | Cite as

Corporate Culture and Investment–Cash Flow Sensitivity

  • Fuxiu Jiang
  • Kenneth A. KimEmail author
  • Yunbiao Ma
  • John R. Nofsinger
  • Beibei Shi
Original Paper
  • 742 Downloads

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.

Keywords

Corporate culture Integrity Investment–cash flow sensitivity 

Notes

Acknowledgements

Fuxiu Jiang acknowledges the financial support from the China National Natural Science Foundation (Nos. 71432008 and 71172179).

Compliance with Ethical Standards

Conflict of interest

The authors declare that they have no conflict of interest.

Ethical Approval

This article does not contain any studies with human participants or animals performed by any of the authors.

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Copyright information

© Springer Science+Business Media Dordrecht 2017

Authors and Affiliations

  • Fuxiu Jiang
    • 1
  • Kenneth A. Kim
    • 2
    • 3
    Email author
  • Yunbiao Ma
    • 1
  • John R. Nofsinger
    • 4
  • Beibei Shi
    • 5
  1. 1.School of BusinessRenmin University of ChinaBeijingChina
  2. 2.School of Economics and ManagementTongji UniversityShanghaiChina
  3. 3.School of ManagementState University of New York at BuffaloBuffaloUSA
  4. 4.College of Business and Public PolicyUniversity of Alaska AnchorageAnchorageUSA
  5. 5.School of International Trade and EconomicsUniversity of International Business and EconomicsBeijingChina

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