The impact of organizational culture on bank stability

This paper examines the impact of organizational culture on bank stability. We rely on the Competing Values Framework (CVF) to identify the four cultural dimensions of banks, namely Control, Collaborate, Compete and Create cultures. Using the textual analysis technique and banks' annual reports, we obtain organizational culture values in conjunction with the CVF for a large sample of US-listed banks from 1994 to 2020. We find that banks with cultures leaning toward consistency, monitoring, and control practices (i.e., Control-oriented and Compete-oriented cultures) exhibit a higher level of stability. Additional analyses show that Control-oriented banks have higher asset quality and are less risky, whereas Compete-oriented banks have higher asset quality and better financial performance. We also find that the impact of culture on bank stability is more pronounced during non-crisis periods and is more prominent for small and medium-sized banks.

Automated summary

This paper uses the Competing Values Framework (CVF) to investigate the impact of organizational culture on bank stability. By analyzing textual data from banks' annual reports, the study identifies four cultural dimensions (Control, Collaborate, Compete, and Create) and their correlations with organizational culture values. The findings suggest that banks with cultures emphasizing consistency, monitoring, and control practices exhibit higher stability. Control-oriented banks have higher asset quality and lower risk, while Compete-oriented banks have higher asset quality and better financial performance. The impact of culture on bank stability is more significant during non-crisis periods and is more pronounced for small and medium-sized banks.