Jillian Grennan is Assistant Professor of Finance at the Duke University Fuqua School of Business. This post is based on her recent paper.
Corporate culture is integral to business success, and its role in banking has attracted considerable attention since the financial crisis of 2007 and 2008. For example, Fahlenbrach, Prilmeier and Stulz (2012) found banks that performed poorly in the 1998 crisis also performed poorly in the recent crisis. This persistence is consistent with a culture explanation. Egan, Matvos, and Seru (2018) found many financial advisors repeatedly engage in misconduct, but they seem to suffer little career consequences because some firms don’t seem to mind.
As a finance professor at Duke University, I study how culture affects firms and what they can do to shape it. In a research study with John Graham, Campbell Harvey, and Shiva Rajgopal, we surveyed 1,348 corporate executives and found that 90 percent believed that culture was important at their firms while 92 percent said improving their firm’s culture would increase the value of the company. But only 16 percent of firms said their culture was where it needed to be, and it wasn’t clear that these executives even knew how to change that.