Managerial Ability, Corporate Social Culture, and M&As

52 Pages Posted: 29 Jun 2021

See all articles by John A. Doukas

John A. Doukas

Old Dominion University - Strome College of Business

Rongyao Zhang

Old Dominion University - Strome College of Business

Date Written: May 27, 2021

Abstract

We investigate the predictive power of corporate social culture, as measured by corporate social responsibility (CSR) intensity, on shareholder wealth when mergers and acquisitions (M&As) are carried out by managers with different traits. We find acquiring firms with talented managers are more inclined to engage in CSR activities to shape corporate social culture, thereby realizing larger short- and long-term gains than their counterparts. We also document that acquiring firms with higher levels of CSR commitment led by talented managers tend to acquire targets of similar corporate social culture and experience significantly positive post-merger returns, suggesting that corporate cultural similarity constitutes an important source of M&A synergies. These findings suggest that corporate culture built through stakeholder relations acts as a differentiation strategy that pays off when skilled managers engage in M&As, which typically prompt information asymmetries between managers and outsiders.

Keywords: Managerial ability, Corporate culture, Corporate social responsibility, Mergers and acquisitions

JEL Classification: G14, G34, M00, M12, M14

Suggested Citation

Doukas, John A. and Zhang, Rongyao, Managerial Ability, Corporate Social Culture, and M&As (May 27, 2021). Journal of Corporate Finance, Vol. 68, No. 101942, 2021, Available at SSRN: https://ssrn.com/abstract=3854246 or http://dx.doi.org/10.2139/ssrn.3854246

John A. Doukas

Old Dominion University - Strome College of Business ( email )

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HOME PAGE: http://www.efmaefm.org/0DOUKAS/doukas.php

Rongyao Zhang (Contact Author)

Old Dominion University - Strome College of Business ( email )

Norfolk, VA 23529
United States

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