Corporate Culture and M&A Deals: Using Text from Crowdsourced Employer Reviews to Measure Cultural Differences

62 Pages Posted: 12 Dec 2023 Last revised: 23 Apr 2024

See all articles by Tobias Hertel

Tobias Hertel

Ruhr University of Bochum - Department of Finance and Banking

Devrimi Kaya

University of Erlangen-Nuremberg-Friedrich Alexander Universität Erlangen Nürnberg

Doron Reichmann

Ruhr University of Bochum - Department of Finance and Banking

Date Written: February 26, 2024

Abstract

Corporate culture constitutes a key success factor in mergers and acquisitions (M&A). We examine the role of acquirer-target cultural differences in US domestic M&A deals. We train a topic model on how employees describe corporate culture in free-response texts of crowdsourced employer reviews to estimate cultural differences between the acquirer-target pairs. We find a negative linear relationship between cultural differences and deal announcement returns. However, adding a squared term of our main variable of interest to our model reveals a U-shaped relationship between cultural differences and announcement returns that is stronger in magnitude and statistical significance than the single term alone. Our results reconcile two competing hypotheses on the role of cultural differences in M&A.

Suggested Citation

Hertel, Tobias and Kaya, Devrimi and Reichmann, Doron, Corporate Culture and M&A Deals: Using Text from Crowdsourced Employer Reviews to Measure Cultural Differences (February 26, 2024). Journal of Banking and Finance, Vol. 161, 2024, Available at SSRN: https://ssrn.com/abstract=4626216 or http://dx.doi.org/10.2139/ssrn.4626216

Tobias Hertel (Contact Author)

Ruhr University of Bochum - Department of Finance and Banking ( email )

Devrimi Kaya

University of Erlangen-Nuremberg-Friedrich Alexander Universität Erlangen Nürnberg ( email )

Lange Gasse 20
Nuremberg, Bavaria 90403
Germany

Doron Reichmann

Ruhr University of Bochum - Department of Finance and Banking ( email )

Germany

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