Cultural distance and value creation of cross-border M&A: The moderating role of acquirer characteristics

© 2018 Elsevier Inc. This paper examines the effects of culture and the interaction between cultural distance and salient acquirer characteristics on value creation of acquiring firms based on a sample of 209 firms over the period of 1998–2012. The findings indicate that Chinese acquirer experience wealth gains ranging from 0.45%–1.49% over a 10 day event window. We find cultural distance to exert a negative influence on value creation of acquirers in the short-and long-term. However, the negative returns are significant only in the short-term but not in the long-term. Further evidence shows that acquirer large size, prior experience and high Tobin's q positively moderate the link between cultural distance and value creation. The results suggest that the effect of culture distance is conditioned by the acquirer size, prior experience and Tobin's q implying that acquirer resources and managerial capabilities are important in dealing with and overcoming cross-border mergers and acquisitions (CBM&A) cultural challenges.