National Culture, Managerial Preferences, and Takeover Performance

Abstract

We investigate the influence of managerial preferences proxied by national culture on takeover performance in a cross-disciplinary international study. To this end, we rely on the cultural dimensions according to Hofstede et al. (2010). Some managerial preferences are related to certain cultural features that may lead to the destruction of firm value in the long run. Using data on a cross-section of 53 countries and 32,856 M&A deals, we find that national culture is statistically significant in explaining different levels of takeover performance. Countries with high individualism and uncertainty avoidance scores appear to exhibit lower post-acquisition risk and stock price performance supporting the managerial entrenchment hypothesis. Masculinity, however, has a positive effect on relative deal size and the takeover outcomes implying that empire building is not observed to cast a negative impact on post-acquisition performance. Results are more pronounced in the case of domestic transactions and also for less globalized acquirer firms due to the absence of the interfering impact of cultural differences.

Keywords: cross-cultural research, cultural values, managerial preferences, mergers and acquisitions

JEL Classification: D03, D22, G02, G34, Z10