The Impact on Cultural Distance on CBM&A success: A Holistic Approach: The Effect of Cultural Distance on the acquirer’s cumulative abnormal returns in Cross-Border M&A: A Quantitative Analysis of U.S. Acquiring Companies, 2013-2019
(2023) BUSN79 20241Department of Business Administration
- Abstract
- Title: The Impact on Cultural Distance on CBM&A success: A Holistic Approach
Course: BUSN79
Authors: Oliver Julius Brännström, Yannick Michael Grotenburg
Purpose: The primary purpose of this study is to examine how cultural differences between U.S. acquiring companies and foreign targets influence the short-term value creation of CBM&As, using a more holistic and nuanced approach towards measuring a nation's culture and the consequential cultural distance between the acquiring and target countries.
Methodology: In the multivariate analysis, we use Ordinary Least Squares (OLS) regression models and control for various economic factors and deal-specific characteristics with robust standard errors clustered by acquiring companies... (More) - Title: The Impact on Cultural Distance on CBM&A success: A Holistic Approach
Course: BUSN79
Authors: Oliver Julius Brännström, Yannick Michael Grotenburg
Purpose: The primary purpose of this study is to examine how cultural differences between U.S. acquiring companies and foreign targets influence the short-term value creation of CBM&As, using a more holistic and nuanced approach towards measuring a nation's culture and the consequential cultural distance between the acquiring and target countries.
Methodology: In the multivariate analysis, we use Ordinary Least Squares (OLS) regression models and control for various economic factors and deal-specific characteristics with robust standard errors clustered by acquiring companies and target countries. We analyze cultural distances through de-bundling the Hofstede Index as well as incorporating additional cultural dimensions such as language, religion, and Economic Freedom. To assess the success of acquisitions, we use the cumulative abnormal return (CAR) around the announcement date.
Theoretical perspective: The theoretical framework used to develop our hypotheses and research questions include the Hofstede’s Cultural Distance Hypothesis, the Cultural Fit Model, the Acculturation Perspective, Agency Theory, Transaction Cost Economics, and Institutional Theory.
Empirical foundation: The sample consists of 1.569 CBM&A deals performed by 482 U.S. public acquiring companies between 2013 and 2019, targeting firms across 58 countries. Data is sourced and collected from Bloomberg Terminal, Yahoo Finance and Refinitiv Eikon, with additional cultural data retrieved from Hofstede Insights and the Heritage Foundation.
Conclusions: The study finds that specific cultural dimensions, such as power distance and masculinity, impact short-term value creation in CBM&As, other dimensions such as individualism and uncertainty avoidance do not show significant effects on short-term value creation. Additionally, the study illustrates that a stronger regulatory environment and higher economic freedom in the target country positively impact CARs of the acquiring company. These findings highlight the importance of a nuanced approach towards cultural integration strategies in CBM&As. (Less)
Please use this url to cite or link to this publication:
http://lup.lub.lu.se/student-papers/record/9167302
- author
- Brännström, Oliver LU and Grotenburg, Yannick Michael LU
- supervisor
-
- Diem Nguyen LU
- organization
- course
- BUSN79 20241
- year
- 2023
- type
- H1 - Master's Degree (One Year)
- subject
- keywords
- Cross-Border Mergers and Acquisitions, Cultural Differences, Hofstede Index, Language Barriers, Religious Barriers, Economic Freedom, Regulatory Quality
- language
- English
- id
- 9167302
- date added to LUP
- 2024-08-07 16:02:31
- date last changed
- 2024-08-07 16:02:31
@misc{9167302,
abstract = {{Title: The Impact on Cultural Distance on CBM&A success: A Holistic Approach
Course: BUSN79
Authors: Oliver Julius Brännström, Yannick Michael Grotenburg
Purpose: The primary purpose of this study is to examine how cultural differences between U.S. acquiring companies and foreign targets influence the short-term value creation of CBM&As, using a more holistic and nuanced approach towards measuring a nation's culture and the consequential cultural distance between the acquiring and target countries.
Methodology: In the multivariate analysis, we use Ordinary Least Squares (OLS) regression models and control for various economic factors and deal-specific characteristics with robust standard errors clustered by acquiring companies and target countries. We analyze cultural distances through de-bundling the Hofstede Index as well as incorporating additional cultural dimensions such as language, religion, and Economic Freedom. To assess the success of acquisitions, we use the cumulative abnormal return (CAR) around the announcement date.
Theoretical perspective: The theoretical framework used to develop our hypotheses and research questions include the Hofstede’s Cultural Distance Hypothesis, the Cultural Fit Model, the Acculturation Perspective, Agency Theory, Transaction Cost Economics, and Institutional Theory.
Empirical foundation: The sample consists of 1.569 CBM&A deals performed by 482 U.S. public acquiring companies between 2013 and 2019, targeting firms across 58 countries. Data is sourced and collected from Bloomberg Terminal, Yahoo Finance and Refinitiv Eikon, with additional cultural data retrieved from Hofstede Insights and the Heritage Foundation.
Conclusions: The study finds that specific cultural dimensions, such as power distance and masculinity, impact short-term value creation in CBM&As, other dimensions such as individualism and uncertainty avoidance do not show significant effects on short-term value creation. Additionally, the study illustrates that a stronger regulatory environment and higher economic freedom in the target country positively impact CARs of the acquiring company. These findings highlight the importance of a nuanced approach towards cultural integration strategies in CBM&As.}},
author = {{Brännström, Oliver and Grotenburg, Yannick Michael}},
language = {{eng}},
note = {{Student Paper}},
title = {{The Impact on Cultural Distance on CBM&A success: A Holistic Approach: The Effect of Cultural Distance on the acquirer’s cumulative abnormal returns in Cross-Border M&A: A Quantitative Analysis of U.S. Acquiring Companies, 2013-2019}},
year = {{2023}},
}