We examine culture as a determinant of capital structure. Our motivation is twofold. First is to contribute to the literature on the determinants of capital structure, which is currently replete with mixed findings. Second is to explore accounting policy implications. Our measure for capital structure is leverage, the debt‐to‐assets ratio. Using Hofstede's dimensions of culture, we compute SECRECY, a measure of secretiveness shown to be associated with information asymmetry and risk aversion. We use 284,158 firm‐years from 46 countries over the fiscal years 1990 through 2009. Our methodology controls for determinants of capital structure identified in prior research and is robust to clustering by years and countries. We find that leverage is positively associated with SECRECY, consistent with the behavior of managers and investors under information asymmetry and risk aversion. We examine the implications of SECRECY and leverage for capital market initiatives, specifically GAAP evolution, whose primary objective is to mitigate information asymmetry. The analysis reveals a conflict of disclosure interests between the firm and lenders, especially in secretive cultures. © 2017 Wiley Periodicals, Inc.

Purpose Using Porter’s (1980) generic strategy to define strategic positioning of law firms, this paper aims to explain why some law firms have more/less pay inequality than others do and examine the impact of pay inequality on law firms’ partners and the job satisfaction of their associates. Design/methodology/approach This paper uses data from The American Lawyer. The strategic positioning, compensation and job satisfaction scores of 614 firm-year observations of US law firms are hand-collected over the period from 2007 to 2016. Findings Non-equity partners at law firms with differentiation strategy (Porter, 1980) are more likely to build rainmaking ability than those at law firms relying on billable hours. As a result, law firms with differentiation strategy have a narrower pay gap between their equity and non-equity partners than those firms relying on billable hours. After controlling for the effects of strategy on pay inequality using two-stage and three-stage least squares models, this paper finds that a wider pay gap deprives associates of job satisfaction. Originality/value Considering strategic positioning, this paper validates why some law firms have more/less pay inequality and proves how pay inequality affects job satisfaction.

PurposeJob satisfaction along with a work–life balance of attorneys in law firms has become an important issue to the legal industry. This paper examines the relationship between strategic positioning of law firms and the job satisfaction of their associates.Design/methodology/approachUsing 1,108 firm year observations of US law firms from 2007 to 2016, this paper examines how a firm's strategic positioning affects the job satisfaction of its associates. The strategic positioning is measured with two financial ratios derived from modified DuPont analysis: revenue per lawyer (RPL) and leverage (LEV). To compare the level of associates' job satisfaction depending on law firms' RPL and LEV, this paper uses t-tests. In addition, this paper adopts OLS regression and simultaneous equations to examine the relation between law firms' strategic positioning and their associates' job satisfaction.FindingsThis paper shows that associates in the law firms with a high LEV strategy have lower job satisfaction because these firms provide a more demanding work environment than in the firms with a high RPL strategy.Originality/valueThis paper first documents empirical evidence that a firm's strategic positioning significantly influences job satisfaction of its employees, using data on the legal industry which is human-capital-intensive and is considered one of the sectors that provide the most notorious work environments.

Purpose Typical accounting firms offer three types of accounting services to their clients: accounting and auditing (AA), tax (TAX) and management advisory services (MAS). Each accounting service has a different revenue persistence. Moreover, revenue persistence is affected by exogenous events such as new regulations (e.g. Sarbanes-Oxley Act [SOX] in 2002) and market conditions (e.g. the financial crisis of 2008). This paper aims to examine the revenue persistence of accounting services and how it is affected by SOX and the financial crisis. Design/methodology/approach Using 742 firm-year observations from 100 of the largest US accounting firms from 1999 to 2015, this paper examines whether revenue from AA, TAX and MAS has different degrees of persistence and how SOX and the financial crisis in 2008 change the revenue persistence of each accounting service. Findings This paper finds that MAS generates more persistent revenue than AA and TAX. SOX enhances the revenue persistence of MAS. The financial crisis makes revenue from AA less persistent than during the pre-financial crisis period. Originality/value This paper contributes to the understanding of the revenue persistence of accounting services and the impact of exogenous events such as SOX and the financial crisis of 2008.