Research

2024

1. From Values to Value: The Impact of Corporate Culture on Product Market Outcome

   Keshav R. Bhattarai, Kathleen P. Fuller, and John Gardner

   Reject and Resubmit at the Journal of Banking and Finance
   Presentation: FMA 2024, SFA 2023, MMM Ph.D. Consortium 2023

   Abs HTML

   We investigate how corporate culture relates to firm performance, focusing specifically on market share growth following an increase in competition in the product market. Using industry-level import tariff cuts in the United States as an exogenous shock, we find that firms with strong cultures tend to experience higher market share growth after a reduction in import tariffs. We also identify two distinct cultural values – the strong-people focus and the strong-technology focus – and find that only firms with a strong-people focus are likely to experience market share growth when faced with intensified competition. In addition, firms with a strong corporate culture demonstrate enhanced operating performance after tariff cuts, and this cultural strength contributes to an improvement in firm value. Our study provides new insights into how corporate culture can, as an intangible asset, help companies adapt to unexpected events.

2. The Relation Between Non-Debt and Debt-Tax Shield: An Evidence from the Tax Cuts and Jobs Act

   Keshav R. Bhattarai, and Kathleen P. Fuller

   Presentation: FMA 2024

   Abs PDF

   We use the setting provided by the Tax Cuts and Jobs Act (TCJA) of 2017 to re-examine the relation between non-debt tax shield (NDTS) and firms’ debt financing decisions. The TCJA brought significant changes to the corporate tax system, including reduced corporate tax rates and limited interest deductions and capital expensing, which reduced the tax benefits of debt. We hypothesize that firms with low marginal benefits of debt, especially those impacted by the interest deductibility limitation, will demonstrate a higher substitution effect between NDTS and debt financing. Employing a regression discontinuity design, we find that affected firms significantly reduce their reliance on debt financing when there is an increase in depreciation deduction, a proxy for NDTS. Furthermore, this effect is more pronounced for firms with lower effective tax rates.

3. Corporate Culture and Managerial Discretion: Evidence from US Property-Casualty Insurance Companies

   Keshav R. Bhattarai, and Kathleen P. Fuller
4. Individual Stock Returns Volatility and Equity Anomalies

   Bae Sunghan, and Keshav R. Bhattarai

   Journal of Finance Issues, (Forthcoming)
5. Aggregating Odd-Lots

   Bae Sunghan, and Keshav R. Bhattarai