We investigate the impacts of cultural environment on mergers and acquisitions (M&A) in the U.S. To measure the cultural environment of a firm, we use several variables of cultural dimension widely adopted in the literature, mainly the percentage of religious adherents and the percentage of Republican supporters in the county where the firm is headquartered. We compute alternative summary variables to proxy for the overall differences in cultural environment between firms. We find that the bigger cultural differences between two firms, the less likely that the firms will start an M&A negotiation.
However, once an M&A negotiation has started, the cultural differences have a small positive impact on the negotiation success rate, a significantly positive impact on the immediate abnormal return of the target, and a small positive impact on the long-run abnormal return of the acquirer, but no negative impacts on other negotiation outcomes.
M&A Cultural environment Cultural distance USA
G14 G34 M14 Z1
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We thank Raymond Kan, Stephen Siegel, Cong Wang, seminar participants at the 2016 American Accounting Association Conference, and two anonymous reviewers for helpful comments. All remaining errors are our responsibility.
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