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Cultural Distance and Corporate Value Created via Overseas M&A

【Authors】
UN Shuwei, HE Xianjie & WANG Chen
【WorkUnit】
UN Shuwei (Shanghai University of International Business and Economics, 201620)

HE Xianjie (Shanghai University of Finance and Economics, 200433)

WANG Chen (Northeast Securities Co., Ltd., 200002)

【Abstract】

The number and scale of overseas merger and acquisition (M&A) have increased significantly in recent years. Overseas M&A is different from local M&A. In the “going out” times, enterprises are faced with challenges of cultural distance. What is the impact of cultural distance on the corporate value created via overseas M&A? This question falls into the categories of finance and sociology. In this paper, we take the overseas M&A of listed companies in China as samples to analyze and test the impact of cultural distance on the corporate value created via overseas M&A. The empirical results show that: (1) the cultural distance between China and the target country has a significant negative relationship with corporate value created via overseas M&A; (2) cultural distance has certain influence on the value creation featuring a complete production efficiency path, the partial R&D path and the partial tax path; (3) if Chinese companies hire executives who have overseas background or have experience in overseas M&A, or the companies which are acquired are in same industry, the negative impact of cultural distance can be reduced. This paper sheds light on the influence of cultural distance on the corporate value created via overseas M&A, and provides practical guidance for Chinese companies on how to deal with cultural distance when they carry out overseas M&A.


JEL:F21, G34, M10

【KeyWords】
Overseas M&A, Cultural Distance, Corporate Value