Too Good to Be True: Impression Management and Integrity's Self-Governing Mechanism in M&As

Abstract

In this paper, we study the influence of corporate culture (i.e., integrity) on impression management around M&As. Building on prior M&A literature, we argue that M&As provide a setting in which managers are prone to follow managerial self-interests and make use of impression management. Using a sample of 2,269 M&A transactions from S&P 500 firms between 2003 and 2018, we provide evidence that higher levels of integrity limit managerial use of impression management (i.e., manipulative disclosure behavior) during M&A announcements. We find an even stronger relationship in contextual situations that increase the risk of managerial self-interests in M&As. Our evidence suggests that integrity limits the risk of managerial self-interests in situations with high managerial discretion. We conclude that integrity acts as a self-governing function in situations that are hard to monitor by traditional governance mechanisms. Our study enriches prior research on impression management and voluntary information disclosure around M&A announcements with a perspective on the cultural value of integrity.