Corporate Social Responsibility Culture and International M&As
64 Pages Posted: 28 Aug 2018 Last revised: 23 Jul 2021
Date Written: November 16, 2020
We examine the role of corporate culture in M&As by utilizing a unique corporate social responsibility (CSR) dataset, providing in-depth information on multiple dimensions of organizational culture in 22 developed markets. In accordance with the prediction of the culture clash theory, a wider divergence between the corporate cultures of the acquiring and target firms is associated with lower acquirer announcement and long-run returns as well as synergistic gains for the combined firm. Cultural misalignment also increases the time required to finalise a deal, reduces the likelihood of deal completion and the percentage of stock payment. Our results are robust to alternative explanations (e.g. similarities in national culture, acquirer CSR performance), different regression specifications, and additional cultural misalignment measures. Our findings highlight the importance of the need for a deeper understanding of the role of CSR for the target selection process, integration planning, and financing choice of M&As to corporations and their investors.
Keywords: Mergers and Acquisitions; Organizational Culture; Corporate Social Responsibility; Synergy
JEL Classification: G14; G34; M14
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