Corporate culture and corporate reporting: A textual analysis

Abstract

This study seeks to contribute to the existing literature by utilizing textual analysis to quantify the corporate culture of publicly traded U.S. firms from 2001 to 2021. The research aims to explore the implications of corporate culture on the quality of financial reporting and the quality of sustainability report which is measured by environmental, social, and governance (ESG) disclosure score. The findings reveal that organizations with a strong corporate culture—characterized by high index scores in five values including innovation, integrity, quality, respect, and teamwork—are less likely to engage in aggressive earnings management and tend to have significantly higher ESG disclosure scores. The study also highlights variations in the impact of different dimensions of corporate culture on earnings management and ESG disclosure scores. Overall, these insights emphasize the benefits of promoting a strong corporate culture to enhance the quality of corporate reporting.