Cultural differences and shareholder value in related mergers: Linking equity and human capital

Abstract Merger literature suggests that the relationship between shareholder gains and the relatedness of merging firms is contingent upon the compatibility of the two firms' top management cultures. This hypothesis is tested by surveying the perceptions of cultural differences of top management teams of recently acquired firms, and then relating these perceptions to related stock market gains to the buying firms. The findings suggest a strong inverse relationship between perceptions of cultural differences and shareholder gains, after controlling for perceptions of the buying firm's tolerance for multiculturalism and the relative size of the merging firms.