Skip to main content

The Effect of Cultural Similarity on Mergers and Acquisitions: Evidence from Corporate Social Responsibility

  • Fred Bereskin, Seong K. Byun, Micah S. Officer and Jong-Min Oh

We study the effect of corporate cultural similarity on merger decisions and outcomes. Using the similarity in firms’ corporate social responsibility characteristics to proxy for cultural similarity, we find that culturally similar firms are more likely to merge. Moreover, these mergers are associated with greater synergies, superior long-run operating performance, and fewer write-offs of goodwill. Our evidence is consistent with the notion that cultural similarity eases post-deal integration. Our results contribute to the literature on the determinants of merger success, provide new evidence on the impact of corporate culture, and offer a new approach to defining firms’ cultural similarity.

Corresponding author
*Bereskin (corresponding author),, University of Missouri Trulaske College of Business; Byun,, University of Mississippi School of Business Administration and Virginia Commonwealth University Business School; Officer,, Loyola Marymount University College of Business Administration; and Oh,, University of Central Florida College of Business Administration.
Hide All

For insightful comments on this article we are indebted to Tom Bates, David Becher, Harry DeAngelo, Jarrad Harford (the editor), Gerard Hoberg, Po-Hsuan Hsu, Simi Kedia, Michelle Lowry, Alexander Wagner, Ralph Walkling (the referee), Huan Yang, and seminar participants at the 2016 European Center for Corporate Control Studies corporate control and governance workshop, the 2017 Financial Management Association Meeting, the 2016 Southern Finance Association Annual Meeting, National Taiwan University, the Norwegian School of Economics, the University of Amsterdam, the University of Central Florida, the University of Delaware, the University of Houston, the University of Ottawa, Washington State University, and Yuan Ze University. Bereskin acknowledges support from the University of Delaware General University Research fund; this article was developed in part when Bereskin was at Drexel University and the University of Delaware.

Hide All
Ahern, K. R.; Daminelli, D.; and Fracassi, C.. “Lost in Translation? The Effect of Cultural Values on Mergers around the World.” Journal of Financial Economics, 117 (2015), 165189.
Ahern, K. R., and Harford, J.. “The Importance of Industry Links in Merger Waves.” Journal of Finance, 69 (2014), 527576.
Akerlof, G., and Kranton, R.. “Identity and the Economics of Organizations.” Journal of Economic Perspectives, 19 (2005), 932.
Aktas, N.; Bodt, E. D.; and Cousin, J.-G.. “Do Financial Markets Care about SRI? Evidence from Mergers and Acquisitions.” Journal of Banking and Finance, 35 (2011), 17531761.
Alexandridis, G.; Hoepner, A. G. F.; Huang, Z.; and Oikonomou, I.. “The Impact of Corporate Cultural Distance on Mergers and Acquisitions.” Working Paper, University of Reading (2016).
Andrade, G.; Mitchell, M.; and Stafford, E.. “New Evidence and Perspectives on Mergers.” Journal of Economic Perspectives, 15 (2001), 103120.
AT&T. “AT&T 2006 Social Responsibility Report.” Available at
Audi, R.; Loughran, T.; and McDonald, B.. “Trust but Verify: MD&A Language and the Role of Trust in Corporate Culture.” Journal of Business Ethics, 139 (2015), 551561.
Azoulay, P.; Graff Zivin, J.; and Wang, J.. “Superstar Extinction.” Quarterly Journal of Economics, 125 (2010), 549589.
Bae, K.-H.; Kang, J.-K.; and Wang, J.. “Employee Treatment and Firm Leverage: A Test of the Stakeholder Theory of Capital Structure.” Journal of Financial Economics, 100 (2011), 130153.
Balsmeier, B.; Fleming, L.; and Manso, G.. “Independent Boards and Innovation.” Journal of Financial Economics, 123 (2017), 536557.
Barrios, J. M. Jr.; Fasan, M.; and Nanda, D.. “Is Corporate Social Responsibility an Agency Problem? Evidence from CEO Turnovers.” Working Paper, University of Chicago (2014).
Bena, J., and Li, K.. “Corporate Innovations and Mergers and Acquisitions.” Journal of Finance, 69 (2014), 19231960.
Benabou, R., and Tirole, J.. “Individual and Corporate Social Responsibility.” Economica, 77 (2010), 119.
Blackwell, M.; Iacus, S.; King, G.; and Porro, G.. “CEM: Coarsened Exact Matching in Stata.” Stata Journal, 9 (2011), 524546.
Bloom, N.; Schankerman, M.; and Van Reenen, J.. “Identifying Technology Spillovers and Product Market Rivalry.” Econometrica, 81 (2013), 13471393.
Bouwman, C. H. S.The Role of Corporate Culture in Mergers & Acquisitions.” In Mergers and Acquisitions: Practices, Performance and Perspectives, Perrault, E., ed. Hauppauge, NY: Nova Science Publishers (2013).
Bradley, M.; Desai, A.; and Kim, E. H.. “Synergistic Gains from Corporate Acquisitions and Their Division between the Stockholders of Target and Acquiring Firms.” Journal of Financial Economics, 21 (1988), 340.
Cartwright, S., and Cooper, C. L.. “The Role of Culture Compatibility in Successful Organizational Marriage.” Academy of Management Executive, 7 (1993), 5770.
Chain Drug Review. “Employees Make Merger Work.” Apr. 28 (2008), 100.
Chatterjee, S.; Lubatkin, M. H.; Schweiger, D. M.; and Weber, Y.. “Cultural Differences and Shareholder Value in Related Mergers: Linking Equity and Human Capital.” Strategic Management Journal, 13 (1992), 319334.
Chatterji, A. K.; Levine, D. I.; and Toffel, M. W.. “How Well Do Social Ratings Actually Measure Corporate Social Responsibility?Journal of Economics and Management Strategy, 18 (2009), 125169.
Cheng, I.-H.; Hong, H.; and Shue, K.. “Do Managers Do Good with Other People’s Money?” Working Paper, Dartmouth College, Columbia University, and University of Chicago (2016).
Chevron. “Chevron Enhances Growth Strategies with Unocal Merger.” Press Release, Aug. 10 (2005).
Cremer, J.Corporate Culture and Shared Knowledge.” Industrial and Corporate Change, 2 (1993), 351386.
CVS Caremark. “2007 Corporate Social Responsibility Report.” Available at
Datta, D. K.Organizational Fit and Acquisition Performance: Effects of Post-Acquisition Integration.” Strategic Management Journal, 12 (1991), 281297.
Dealbook. “How the AOL-Time Warner Deal Went Wrong.” Available at, Jan. 11 (2010).
Deng, X.; Kang, J.-K.; and Low, B. S.. “Corporate Social Responsibility and Stakeholder Value Maximization: Evidence from Mergers.” Journal of Financial Economics, 110 (2013), 87109.
Edmans, A.Does the Stock Market Fully Value Intangibles? Employee Satisfaction and Equity Prices.” Journal of Financial Economics, 101 (2011), 621640.
Edmans, A.; Li, L.; and Zhang, C.. “Employee Satisfaction, Labor Market Flexibility, and Stock Returns around the World.” Working Paper, London Business School (2017).
Engert, O.; Gandhi, N.; Schaninger, W.; and So, J.. “Assessing Cultural Compatibility: A McKinsey Perspective on Getting Practical about Culture in M&A.” McKinsey & Company Report (2010).
Fan, J. P. H., and Goyal, V. K.. “On the Patterns and Wealth Effects of Vertical Mergers.” Journal of Business, 79 (2006), 877902.
Feldman, E. R.; Amit, R.; and Villalonga, B.. “Corporate Divestitures and Family Control.” Strategic Management Journal, 37 (2014), 429446.
Feldman, M. L., and Spratt, M. F.. Five Frogs on a Log: A CEO’s Field Guide to Accelerating the Transition in Mergers, Acquisitions, and Gut Wrenching Change. Chichester, UK: Wiley (2001).
Finkelstein, S.“The DaimlerChrysler Merger.” Case Study 1-0071, Tuck School of Business (2002).
Frijns, B.; Gilbert, A.; Lehnert, T.; and Tourani-Rad, A.. “Uncertainty Avoidance, Risk Tolerance and Corporate Takeover Decisions.” Journal of Banking and Finance, 37 (2013), 24572471.
Gao, F.; Lisic, L. L.; and Zhang, I. X.. “Commitment to Social Good and Insider Trading.” Journal of Accounting and Economics, 57 (2014), 149175.
Garfinkel, J. A., and Hankins, K. W.. “The Role of Risk Management in Mergers and Merger Waves.” Journal of Financial Economics, 101 (2011), 515532.
Gompers, P.; Ishii, J.; and Metrick, A.. “Corporate Governance and Equity Prices.” Quarterly Journal of Economics, 118 (2003), 107155.
Graham, J. R.; Harvey, C. R.; Popadak, J.; and Rajgopal, S.. “Corporate Culture: Evidence from the Field.” Working Paper, Duke University (2015).
Gu, F., and Lev, B.. “Overpriced Shares, Ill-Advised Acquisitions, and Goodwill Impairment.” Accounting Review, 86 (2011), 19952022.
Guiso, L.; Sapienza, P.; and Zingales, L.. “Does Culture Affect Economic Outcomes?Journal of Economic Perspectives, 20 (2006), 2348.
Harford, J.What Drives Merger Waves?Journal of Financial Economics, 77 (2005), 529560.
Harford, J.; Humphery-Jenner, M.; and Powell, R.. “The Sources of Value Destruction in Acquisitions by Entrenched Managers.” Journal of Financial Economics, 106 (2012), 247261.
Harford, J.; Jenter, D.; and Li, K.. “International Cross-Holdings and Their Effect on Acquisition Decisions.” Journal of Financial Economics, 99 (2011), 2739.
Healy, P. M.; Palepu, K. G.; and Ruback, R. S.. “Does Corporate Performance Improve after Mergers?Journal of Financial Economics, 31 (1992), 135175.
Hoberg, G., and Phillips, G.. “Product Market Synergies and Competition in Mergers and Acquisitions: A Text-Based Analysis.” Review of Financial Studies, 23 (2010), 37733811.
Hoberg, G., and Phillips, G.. “Product Integration and Merger Success.” Working Paper, University of Southern California and Tuck School at Dartmouth (2017).
Hoi, C. K.; Wu, Q.; and Zhang, H.. “Is Corporate Social Responsibility (CSR) Associated with Tax Avoidance? Evidence from Irresponsible CSR Activities.” Accounting Review, 88 (2013), 20252059.
Hong, H. G.; Kubik, J. D.; and Scheinkman, J. A.. “Financial Constraints on Corporate Goodness.” Working Paper, Columbia University and Syracuse University (2011).
Hutton, I.; Jiang, D.; and Kumar, A.. “Corporate Policies of Republican Managers.” Journal of Financial and Quantitative Analysis, 49 (2014), 12791310.
Iacus, S. M.; King, G.; and Porro, G.. “Multivariate Matching Methods That Are Monotonic Imbalance Bounding.” Journal of the American Statistical Association, 106 (2011), 345361.
Ishii, J., and Xuan, Y.. “Acquirer-Target Social Ties and Merger Outcomes.” Journal of Financial Economics, 112 (2014), 344363.
Jaffe, A. B.“Technological Opportunity and Spillovers of R&D: Evidence from Firms’ Patents, Profits and Market Value.” NBER Working Paper No. 1815 (1986).
Karolyi, G. A.The Gravity of Culture for Finance.” Journal of Corporate Finance, 41 (2016), 610625.
King, G., and Nielsen, R.. “Why Propensity Scores Should Not Be Used for Matching.” Working Paper, Harvard University and MIT (2016).
Kreps, D.Corporate Culture and Economic Theory, Perspectives on Positive Political Economy.” In Perspectives on Positive Political Economy, Alt, J. E. and Shepsle, K. A., eds. Cambridge, UK: Cambridge University Press (1990).
Lazear, E. P.Corporate Culture and Diffusion of Values.” In Trends in Business Organization: Do Participation and Cooperation Increase Competitiveness? Siebert, H., ed. Heidelberg, Germany: J.C.B. Mohr (1995).
Lin, C.; Officer, M. S.; and Shen, B.. “Managerial Risk-Taking Incentives and Merger Decisions.” Journal of Financial and Quantitative Analysis, 53 (2018), 643680.
Loughran, T., and Ritter, J.. “Why Has IPO Underpricing Changed over Time?Financial Management, 33 (2004), 537.
Lu, W.“Corporate Cultural Spillover and Synergistic Gains: Evidence from Mergers and Acquisitions.” Working Paper, Wuhan University (2014).
Maksimovic, V.; Phillips, G.; and Prabhala, N. R.. “Post-Merger Restructuring and the Boundaries of the Firm.” Journal of Financial Economics, 102 (2011), 317343.
Margolis, J. D.; Elfenbein, H. A.; and Walsh, J. P.. “Does It Pay to Be Good … and Does It Matter? A Meta-Analysis of the Relationship between Corporate Social and Financial Performance.” Working Paper, Harvard University, Washington University in St. Louis, and University of Michigan (2009).
McGee, T.; Thomas, T.; and Thomson, R.. “Integration Report 2015: Putting the Pieces Together.” Deloitte Report, available at (2015).
McMains, A.Omnicom Says Cultural Differences with Publicis Were Significant.” Adweek (2014).
McWilliams, A., and Siegel, D.. “Corporate Social Responsibility: A Theory of the Firm Perspective.” Academy of Management Review, 25 (2001), 117127.
Meier, J.-M. A., and Servaes, H.. “The Bright Side of Fire Sales.” Working Paper, London Business School (2015).
Morck, R.; Shleifer, A.; and Vishny, R. W.. “Do Managerial Objectives Drive Bad Acquisitions?Journal of Finance, 45 (1990), 3148.
MSCI Inc. “MSCI ESG Indexes: The Combination of MSCI’s Leading Index and ESG Research Expertise.” Available at
Officer, M. S.Termination Fees in Mergers and Acquisitions.” Journal of Financial Economics, 69 (2003), 431467.
PricewaterhouseCoopers. “CSR Trends 2010.” Available at
Rhodes-Kropf, M., and Robinson, D.. “The Market for Mergers and the Boundaries of the Firm.” Journal of Finance, 63 (2008), 11701211.
Rhodes-Kropf, M., and Viswanathan, S.. “Market Valuation and Merger Waves.” Journal of Finance, 59 (2004), 26852718.
Sarala, R. M.; Junni, P.; Cooper, C. L.; and Tarba, S. Y.. “A Sociocultural Perspective on Knowledge Transfer in Mergers and Acquisitions.” Journal of Management, 42 (2016), 12301249.
Savor, P. G., and Lu, Q.. “Do Stock Mergers Create Value for Acquirers?Journal of Finance, 64 (2009), 10611097.
Schein, E. Organizational Culture and Leadership. San Francisco, CA: Jossey-Bass (1985).
Schein, L. Managing Culture in Mergers and Acquisitions. New York, NY: The Conference Board (2001).
Seru, A.Firm Boundaries Matter: Evidence from Conglomerates and R&D Activity.” Journal of Financial Economics, 111 (2014), 381405.
Shenkar, O.Cultural Distance Revisited: Towards a More Rigorous Conceptualization and Measurement of Cultural Differences.” Journal of International Business Studies, 32 (2001), 519535.
Shleifer, A., and Vishny, R.. “Stock Market Driven Acquisitions.” Journal of Financial Economics, 70 (2003), 295311.
Stahl, G. K., and Voigt, A.. “Do Cultural Differences Matter in Mergers and Acquisitions? A Tentative Model and Examination.” Organization Science, 19 (2008), 160176.
Tremblay, A.“Cultural Differences, Synergies and Mergers and Acquisitions.” Working Paper, York University (2017).
Van den Steen, E.Culture Clash: The Costs and Benefits of Homogeneity.” Management Science, 56 (2010a), 17181738.
Van den Steen, E.On the Origin of Shared Beliefs (and Corporate Culture).” RAND Journal of Economics, 41 (2010b), 617648.
Wang, C., and Xie, F.. “Corporate Governance Transfer and Synergistic Gains from Mergers and Acquisitions.” Review of Financial Studies, 22 (2009), 829858.
Weber, Y.Corporate Cultural Fit and Performance in Mergers and Acquisitions.” Human Relations, 49 (1996), 11811202.
Zingales, L.The ‘Cultural Revolution’ in Finance.” Journal of Financial Economics, 117 (2015), 14.
Recommend this journal

Email your librarian or administrator to recommend adding this journal to your organisation's collection.

Journal of Financial and Quantitative Analysis
  • ISSN: 0022-1090
  • EISSN: 1756-6916
  • URL: /core/journals/journal-of-financial-and-quantitative-analysis
Please enter your name
Please enter a valid email address
Who would you like to send this to? *


Full text views

Total number of HTML views: 0
Total number of PDF views: 0 *
Loading metrics...

Abstract views

Total abstract views: 0 *
Loading metrics...

* Views captured on Cambridge Core between <date>. This data will be updated every 24 hours.

Usage data cannot currently be displayed