59 Pages Posted: 1 Feb 2010 Last revised: 2 Jul 2015
Date Written: January 17, 2012
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: 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