Corporate culture and firm resilience in China: Evidence from the Sino-US trade war

Abstract

Prior literature shows that corporate culture matters for firm performance and enhance corporate resilience in crises. We construct a text-based measure of corporate culture for Chinese listed firms and study whether and how strong corporate culture improves corporate resilience during the Sino-US trade war. Empirical analyses suggest that a strong corporate culture mitigates the deteriorating stock returns due to the trade war exposure through two potential influencing mechanisms, enhancing operating performance and mitigating financial constraint. Results also indicate that strong culture works more effectively for privately owned enterprises (POEs) than their state-owned peers, and individual cultures of innovation, hardworking, teamwork, and quality have material effects on stock performance of the POEs. The evidence pinpoints that strong corporate culture helps insulate Chinese private firms more from external shocks and achieve a more sustainable growth.