Corporate Culture and M&As

Abstract

We examine the role of corporate culture in M&As by utilising a unique data-set, providing in-depth information on multiple dimensions of organizational culture in 22 developed markets. In accordance with the prediction of the culture clash theory, a wider divergence between the corporate cultures of the acquiring and target firms is associated with lower acquirer announcement and long-run returns as well as synergistic gains for the combined firm. Cultural misalignment also increases the time required to consummate a deal and reduces the likelihood of deal completion and the share of equity-financing. Our findings have important implications for the M&A target selection process, integration planning, and financing choice.

Keywords: Mergers and Acquisitions; Organizational Culture; Post-Merger Integration; Acquisition Gains

JEL Classification: G14; G34; M14