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The Value of Culture

Paper Session

Saturday, Jan. 5, 2019 10:15 AM - 12:15 PM

Hilton Atlanta, 203
Hosted By: Association of Financial Economists & American Economic Association
  • Chair: Jillian Grennan, Duke University

The Information Value of Corporate Social Responsibility

Kose John
,
New York University
Jongsub Lee
,
University of Florida
Jimmy Oh
,
Hanyang University

Abstract

Using a simple cheap-talk game, we theoretically demonstrate that corporate social responsibility (CSR) helps mitigate the CEO-board information asymmetry, leading to more informed advising and monitoring by the board. By optimally engaging in CSR, the board can take advantage of stakeholder information revelation and reduce its informational dependence on the CEO, which enables the shareholders to choose an ex ante higher level of board independence. For a sample of U.S. firms between 1999 and 2013, we find strong support for this strategic complementarity between board independence and the information value of CSR. Our results highlight a novel rationale for CSR–the information motive.

Corporate Culture as an Implicit Contract

Jessica Jeffers
,
University of Chicago
Michael Lee
,
New York Federal Reserve

Abstract

This paper empirically studies the role of culture as an implicit contract, using connections among coworkers as a measure of employee culture. We first develop simple measures of firm internal connectivity based on LinkedIn's network data, and show these measures are strongly correlated with external ratings of employee relations and satisfaction. We then test the hypothesis that culture is a tool to form implicit contracts. Using state-level changes to employment agreements as shocks to explicit contracts, we show that these changes significantly impact employees in weakly connected firms, but the effects dissipate for strongly connected firms. Our results suggest that strong connectivity reduces the firm's dependence on explicit contracts to retain human capital.

The Impact of Socioeconomic and Cultural Differences on Online Trade

Daniel Elfenbein
,
Washington University
Ray Fisman
,
Boston University and NBER
Brian McManus
,
University of North Carolina

Abstract

We use eBay data to investigate how trade in the U.S. is influenced by between-state differences in socioeconomic characteristics, tastes, and trust. States’ similarity in cultural characteristics (ethnicity, religiosity, and political behavior) is predictive of online trade patterns. This is partly due to correlation between cultural markers and consumers’ tastes. Consumers are also less likely to trade with dissimilar partners who lack extensive reputations or certification, which suggests that consumers infer seller trustworthiness from cultural similarity. There is no correlation between cultural similarity and buyer satisfaction, however, suggesting that perceived differences in trustworthiness are not validated by actual transactions.
Discussant(s)
Diego Garcia
,
University of Colorado
Paige Ouimet
,
University of North Carolina
S. Abraham Ravid
,
Yeshiva University
JEL Classifications
  • G4 - Behavioral Finance
  • G2 - Financial Institutions and Services