Does Target Country Cultural Orientation Influence M&A?. (15th January 2021)

• Record Type: Journal Article
• Authors: Ahmad, Muhammad Farooq; Aziz, Saqib; Dowling, Michael M.
• Is Part Of: British journal of management. Volume 33:Number 2(2022)
• Page Start: 906
• Page End: 938
• Publication Date: 2021-01-15
• Subjects: Management -- Periodicals; 658.00941
• DOI: 10.1111/1467-8551.12462
• Languages: English
• ISSNs: 1045-3172

Abstract

Abstract: We examine whether the cultural orientation of target firms influences the outcomes of international mergers and acquisitions (M&As). Prior research shows that the national culture of the acquiring firm country influences M&As, as well as the distance between the acquiring and target country cultures. Not previously studied from a cultural perspective of M&As has been the target country culture, despite estimates that about 40% of M&As are target‐initiated. Our focus is on target firm cultural orientation, including how cultural orientation affects the likelihood of, and returns from, M&As. Our testing applies three cultural orientation factors (results, tradition and people orientation) extracted from a GLOBE cultural framework to a dataset of firm‐level M&A data across 39 countries, in 1990–2016. We find that firms from cultures with a results orientation are less likely to become M&A targets and also experience higher cumulative abnormal returns if acquired, while firms from countries with cultures with a tradition orientation or a people orientation are more likely to become targets but experience lower cumulative abnormal returns if acquired. These results are robust to a comprehensive range of robustness tests. Our findings suggest that understanding the cultural orientation of target firms is important to understanding M&A outcomes.