Management team cultural alignment and mergers and acquisitions

Abstract

We examine the way cultural alignment between acquirer and target management teams affects the success of M&As. By tracing managers’ cultural origins based on their family names, we obtain two measures of cultural alignment: cultural distance and origin similarity between the management teams. The regression results show that firms with culturally aligned management teams are more likely to form merger-pairs. Regarding merger-performance, cultural alignment increases acquirer–target-combined announcement returns, acquirers’ post-merger operating and market performance, and the integration of targets’ top executives. Taken together, our results suggest that managers’ cultural alignment is an important determinant of merger success.