Corporate Culture and Merger Success

What role does corporate culture play in merger success? We show that corporate culture influences both the probability to act as an acquirer and the outcome of the deal itself. We use text analysis to measure corporate culture for all US listed companies relying on the Competing Values Framework. We disentangle companies culturally oriented inside their organization (focused on collaboration and cost control) from companies oriented outside their organization (focused on competition and innovation). We then study the impact of corporate culture on merger participation and outcome: we show that an internally-oriented corporate culture significantly decreases the participation to merger deals, but has a positive impact on the merger outcome as captured by announcement returns and by post-merger operating performance. Our results suggest that companies focused on collaboration and on their internal processes create more value through their acquisitions.