Friend with benefits: Evidence from director's corruption culture on mergers and acquisitions

Abstract

This study investigated the effects of the culture of corruption among independent directors on mergers and acquisitions (M&As) in 1996–2015 in the US. The study measured the corruption culture by investigating independent directors’ surnames and countries of origin. The results demonstrated the important role played by corruption culture: higher levels of corruption culture led to higher deal valued M&A activities. Moreover, firms tended to acquire targets with similar levels of corruption culture. The results were more pronounced for firms with poor corporate governance, weak religious norms, and low analyst coverage. Overall, the results showed the importance of both corruption and culture similarity in M&A outcomes.