Similarity or Dissimilarity is Better: Does Culture Dissimilarity Impact M & A Performances?

The primary accomplishment of this study is to explore how national culture dissimilarities impact pre and post performances of the resulted acquirers in China Merger and Acquisition (M&A) cases. This article developed the simplified representations of the National Culture Dissimilarity Index (NCDI) to examine the built-in models by taking hierarchical regression analysis approach. The NCDI consists of five factors, Power Distance Index (PDI), Uncertainty Avoidance Index (UAI), Individualism (IDV), Masculinity (MAS) and Long-Term Orientation (LTO). Data collected on 92 merger and acquisition firms between years of 1985 and 2005 indicated that the culture between acquirers and targets had significant differences. Moreover, results showed that the more of national culture dissimilarity existed, the worse of acquirers’ growth percentage in ROA and ROE resulted. However, national culture factors could not directly express the negative change of stock premium.