Competition Culture and Corporate Finance

This book introduces a measure of firms’ competition culture based on a textual analysis and natural language processing (NPL) of firms’ 10-K filings. Using this measure, the book explores the relationship between competition culture and various phenomena in corporate finance, specifically, institutional ownership structure, stock return performance, idiosyncratic stock price crash risk, meeting/beating analysts’ earnings expectations, and earnings management activity, for a large sample of US-based financial and non-financial firms. In particular, the book provides evidence that transient institutional ownership intensifies firms’ competition culture, while dedicated institutional ownership lessens it. In addition, the book’s findings suggest that firms with greater levels of competition culture achieve higher levels of short-term stock return performance, experience greater incidence of idiosyncratic stock price crashes, and are more prone to meet/beat analysts forecast and engagein accruals-based earnings manipulation.

Finally, the book examines the role played by competition culture in financial firms (i.e., banks). Specifically, the book explores the effect of competition culture on bank lending and shows that banks with greater levels of competition culture are generally more prone to engage in procyclical lending activity. The findings of the book have significant policy implications and will be of interests to regulators, accounting standard-setters, managers and those charged with firm governance, career academics and researchers, graduates, and those generally interested in the role played by corporate culture in the related fields of finance, economics, and accounting.

“I highly recommend “Competition Culture and Corporate Finance” to anyone interested in understanding the role of corporate culture in the field of finance. Dr. Terry Harris provides valuable insights into the impact of competition culture on various phenomena in corporate finance, including stock return performance, idiosyncratic stock price crash risk, meeting/beating analysts’ earnings expectations, and earnings management activity. Using natural language processing to analyse firms’ 10-K filings, the book introduces a measure of competition culture and provides evidence that transient institutional ownership intensifies firms’ competition culture, while dedicated institutional ownership lessens it. The book’s findings also suggest that firms with greater levels of competition culture achieve higher levels of short-term stock return performance and are more prone to meet/beat analysts’ forecasts and engage in accruals-based earnings manipulation. Furthermore, the book examines the role played by competition culture in financial firms, specifically in the banking sector. The findings have significant policy implications and will be of interest to regulators, accounting standard-setters, managers, and those charged with firm governance, as well as career academics and researchers, graduates, and anyone interested in the impact of corporate culture on firms' economic outcomes. Dr. Harris’s background in computer science, accounting, and finance provides a unique perspective on the subject matter, and his theoretical and applied research is evident throughout the book. “Competition Culture and Corporate Finance” is a well-written and well-researched book that is sure to become an essential resource for anyone interested in understanding the relationship between competition culture and corporate finance.” (Professor Laurence Ferry, Professor of Accounting, Durham University, United Kingdom)

“If you’re interested in understanding the complex relationship between corporate culture, competition, and financial outcomes, then Dr. Terry Harris’s book, “Competition Culture and Corporate Finance,” is a must-read. Using innovative methods like natural language processing (NPL) and textual analysis of firms’ 10-K filings, Dr. Harris provides an insightful and detailed analysis of the impact of competition culture on various phenomena in corporate finance. The book’s findings shed light on critical issues like institutional ownership structure, stock return performance, idiosyncratic stock price crash risk, meeting/beating analysts’ earnings expectations, and earnings management activity. The evidence presented suggests that firms with higher levels of competition culture experience greater short-term stock return performance, are more prone to meeting/ beating analysts' forecast, and engage in accruals-based earnings manipulation. In contrast, dedicated institutional ownership lessens competition culture, which is a crucial factor in sha** a firm’s behaviour in a highly competitive market. The book’s implications are significant for regulators, accounting standard-setters, managers, and those charged with firm governance. Dr. Harris’s work will also be of interest to career academics and researchers, graduates, and anyone interested in the role of corporate culture in finance, economics, and accounting. In addition, the book examines the role of competition culture in financial firms and its effect on bank lending, providing a valuable perspective for policymakers and practitioners. All told, “Competition Culture and Corporate Finance” is a timely and insightful contribution to the field of corporate finance. Dr. Harris’s rigorous research and analysis offer a wealth of information and insights into the complex relationship between competition culture and financial outcomes, making it a must-read for anyone interested in the intersection of finance, culture, and competition.” (Professor Omneya Abdelsalam, Professor of Accounting & Finance, Durham University, United Kingdom)

Terry Harris is an Associate Professor at Durham University Business School, Durham University, United Kingdom. He received his Bachelor’s degree (double major) in Computer Science and Accounting, a Master of Philosophy (MPhil) in Computer Science focusing on Machine Learning, a professional accounting designation with the Association of Chartered Certified Accountants (ACCA), and a Doctor of Philosophy (PhD) in Finance. Terry has engaged in theoretical and applied research and publications primarily focused on the impact of corporate culture on firms’ economic outcomes.  In this vein, he has co-authored and published the articles entitled “Institutional Ownership and Firms’ Thrust to Compete” in the British Journal of Management and “Measuring firms’ market orientation using textual analysis of 10-K filings” also in the British Journal of Management.