Does Cultural Difference Affect CEO's Merger & Acquisitions Decision?

Abstract

Abstract:

Culture is an important determinant of economic growth; cultural environment plays a key role in the growth of managers and the decisions of enterprises. The cultural differences between northern and southern China have a long history. In the enterprise, the cultural differences are reflected in the CEO's decision-making behavior. In this paper, we use a dataset of Chinese listed firms spanning from 2012 to 2015 to examine the relationship between 2,158 managers from northern and southern China respectively and 5,498 M&A deals they get involved in. We find that the count, value and diversity of M&A deals launched by CEOs from Northern China are larger than those from Southern China and chairman is not as dominant as CEO in M&A-related decision making. It is the cultural background of CEO rather than that of the place where the enterprise is located that plays the major role in M&A-related decision making. Further study finds that in the areas where corporate system is not well developed, the cultural background of CEO has a more significant influence on M&A-related decision making.

Key words: cultural difference, M&A, CEO's decision

Li Shanmin, Gong Shuyu, Zhuang Mingming. Does Cultural Difference Affect CEO's Merger & Acquisitions Decision?[J]. , 2019, 31(6): 144-159.

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