Corporate culture and investment inefficiency

Using an aggregate measure of corporate culture, we find that firms with stronger corporate culture encounter lower investment inefficiency. We show that reducing information asymmetry or engaging in tax avoidance are two potential channels through which corporate culture reduces investment inefficiency. Further analyses reveal that the aforementioned relationship is more pronounced for firms with lower local religiosity, firms with less corporate social responsibility engagement, and financially unconstrained firms. Overall, our findings contribute to the literature stressing the importance of corporate culture for corporate decisions and outcomes, and hence, for adding value. • We examine whether, and if so, how corporate culture affects corporate investment inefficiency. • We find that firms with stronger corporate culture encounter lower investment inefficiency. • The association is more pronounced for financially unconstrained firms. • We document that reducing information asymmetry or engaging in tax avoidance are two potential channels through which corporate culture reduces investment inefficiency • We highlight the substitutability between corporate culture and local religiosity, as well as between corporate culture and CSR engagement in reducing investment inefficiency. • Our findings support the importance of corporate culture for corporate decisions and outcomes, and hence, for adding value.