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.
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.
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