Abstract:

This study investigates the determining factors of an IPO firm’s culture and the effect of corporate culture on IPO firms’ profitability and risk of financial distress. Using a sample of 1,383 US firms that went public between 1996 and 2011, we provide strong evidence that VC-backed companies are more likely to exhibit a competition-oriented and a creation-oriented culture and that regional culture and industry characteristics play a key role in explaining a firm’s cultural orientation. Moreover, we find that IPO firms with a highly competition-and creation-oriented culture experience higher profitability and less risk of financial distress than do other IPO firms.