Lost in Translation? The Effect of Cultural Values on Mergers Around the World

59 Pages Posted: 1 Feb 2010 Last revised: 2 Jul 2015

Kenneth R. Ahern

University of Southern California - Marshall School of Business; National Bureau of Economic Research (NBER)

Daniele Daminelli

Politecnico di Milano - Department of Management, Economics and Industrial Engineering

Cesare Fracassi

University of Texas at Austin

Date Written: January 17, 2012

Abstract

We find strong evidence that three key dimensions of national culture (trust, hierarchy, and individualism) affect merger volume and synergy gains. The volume of cross-border mergers is lower when countries are more culturally distant. In addition, greater cultural distance in trust and individualism leads to lower combined announcement returns. These findings are robust to year and country-level fixed effects, time-varying country-pair and deal-level variables, as well as instrumental variables for cultural differences based on genetic and somatic differences. The results are the first large-scale evidence that cultural differences have substantial impacts on multiple aspects of cross-border mergers.

Keywords: Mergers & Acquisitions, Culture, Trust, Hierarchy, Individualism, Egalitarianism, International, Cross-border

JEL Classification: G34, M14, Z1

Suggested Citation

Ahern, Kenneth R. and Daminelli, Daniele and Fracassi, Cesare, Lost in Translation? The Effect of Cultural Values on Mergers Around the World (January 17, 2012). Journal of Financial Economics (JFE), Vol. 117, No. 1, 2015. Available at SSRN: https://ssrn.com/abstract=1545514 or http://dx.doi.org/10.2139/ssrn.1545514

Kenneth Robinson Ahern (Contact Author)

University of Southern California - Marshall School of Business ( email )

701 Exposition Blvd
Los Angeles, CA 90089
United States

HOME PAGE: http://www-bcf.usc.edu/~kahern/

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Daniele Daminelli

Politecnico di Milano - Department of Management, Economics and Industrial Engineering ( email )

Via Lambruschini 4
Milan, 20156
Italy
+39 0223992805 (Phone)

Cesare Fracassi

University of Texas at Austin ( email )

Red McCombs School of Business
1 University Station B660
Austin, TX 78712
United States

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