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Lost in translation? The effect of cultural values on mergers around the world

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  • Ahern, Kenneth R.
  • Daminelli, Daniele
  • Fracassi, Cesare

Abstract

We find strong evidence that three key dimensions of national culture (trust, hierarchy, and individualism) affect merger volume and synergy gains. The volume of cross-border mergers is lower when countries are more culturally distant. In addition, greater cultural distance in trust and individualism leads to lower combined announcement returns. These findings are robust to year and country-level fixed effects, time-varying country-pair and deal-level variables, as well as instrumental variables for cultural differences based on genetic and somatic differences. The results are the first large-scale evidence that cultural differences have substantial impacts on multiple aspects of cross-border mergers.

Suggested Citation

  • Ahern, Kenneth R. & Daminelli, Daniele & Fracassi, Cesare, 2015. "Lost in translation? The effect of cultural values on mergers around the world," Journal of Financial Economics, Elsevier, vol. 117(1), pages 165-189.
    • Handle: RePEc:eee:jfinec:v:117:y:2015:i:1:p:165-189
    DOI: 10.1016/j.jfineco.2012.08.006
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    More about this item

    Keywords

    Mergers & acquisitions; Cultural values; Trust; International; Cross-border;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • Z1 - Other Special Topics - - Cultural Economics

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