Corporate culture and stock returns: evidence from Indian companies

Abstract

Purpose The purpose of this paper is to investigate the stock market performance of companies featured in the survey “Best Companies to Work For” as a proxy for corporate culture. Design/methodology/approach The authors employed the portfolio formation and event study methods from finance to examine the linkage between corporate culture and future stocks returns. The lists of India’s best place to work for by Great Place to Work® Institute and Business Today (BT), India’s leading business magazine, form the primary surrogate for a great corporate culture. The authors compared the stock market performance of the culture portfolio vis-à-vis market index, in addition to using Carhart’s (1997) four-factor model. Findings A portfolio of Indian firms that featured in the “Best Companies to Work For” by Great Place to Work© Institute and BT magazine provides a higher return than the market index Sensex both on an ordinary return and on a risk-adjusted basis. The four-factor αs of the value-weighted culture portfolios are significant, implying that these portfolios have provided abnormal returns during the sample period. Moreover, the findings suggest a positive drift in the abnormal returns after inclusion in the “Best Companies to Work For” list. Research limitations/implications The results are largely in conformity with the prediction of the theory that states that corporate culture is an economic asset for a firm that increases its value. Practical implications From an investor’s point of view, the study indicates that investment in “Best Companies to Work For” is a better alternative than passive index investing. Originality/value This study fills the empirical void in the relationship between corporate culture and stock market performance in the Indian context.

Organizational culture and leadership as antecedents to organizational flexibility: implications for SME competitiveness

“…In the SME literature, the influence of organizational culture on firm performance abounds (Brettel et al, 2015;Dabi c et al, 2018;Fatima and Bilal, 2019;Aziz et al, 2019). Morgan (2000) asserts that the integration of culture and strategy creates the strategic direction of the firm and consequently determines competitiveness.…”

Antecedents of strategic thinking and its impact on competitive advantage

“…A company, which has a valuable, rare and imperfectly imitable culture is successful in having a sustainable competitive advantage (Barney, 1991). Aziz et al (2019) found that Indian companies that got recognition in the "Best Companies to Work For" list gave more returns than the market index. Corporate culture is a necessity for not only competitive advantage but also to retain skilled employees within the organization who are vital for its growth (Sadri and Lees, 2001).…”

“…Strategic thinking can help a firm in gaining a competitive advantage through specialized human and perceptual abilities (Shaik and Dhir, 2020). The study of literature has shown that the identified antecedents of strategic thinking (vision, creativity, corporate culture and knowledge management) are related to competitive advantage (Tripathi and Ghosh, 2020;Aziz et al, 2019;Lyndon and Pandey, 2019;Khan, 2016;Self et al, 2015). However, studies in the extant literature lack the answer to whether strategic thinking plays a role of mediator on the relationship between competitive advantage and antecedents.…”