Corporate culture, staggered boards, and managerial entrenchment: Evidence from textual analysis

Capitalizing on an innovative measure of corporate culture derived from sophisticated machine learning algorithms and textual analysis, we explore how corporate culture is influenced by one of the most controversial corporate governance mechanisms, i.e., staggered boards. Our findings demonstrate that corporate culture is considerably weakened in the presence of a staggered board, consistent with the notion that staggered boards exacerbate managerial entrenchment and lead to more adverse corporate policies and outcomes. Specifically, corporate culture is approximately 7% weaker, as indicated by a decline in the text-based corporate culture score, in firms with a staggered board than those with a unitary board. Furthermore, we show that the negative effect of staggered boards on corporate culture is significantly more pronounced during more uncertain times. Additional analysis validates the results, i.e., propensity score matching, entropy balancing, and instrumental-variable analysis.