Cultural Heterogeneity of Top Management Teams, Cross-Border Acquisitions, and Financial Performance of Chinese Publicly Listed Companies

Using data from Chinese publicly listed companies (PLCs) over the 2010-2017 period, this paper examines the impact of cultural heterogeneity within the top management team (TMT) on the post-acquisition performance of cross-border acquisitions (CBAs). TMT cultural heterogeneity is measured as the cultural distance between the board chairperson and chief executive officer (CEO), based on the south-rice-north-wheat cultural dichotomy in traditional China in 1916. Overall, we find that TMT cultural heterogeneity can increase the likelihood of CBAs. However, it also has a significantly negative impact on both the market performance and profitability of privately-owned Chinese PLCs after the CBAs. To provide a comprehensive analysis, we also explore the moderating effects of state ownership and high-tech industries. The results reveal that TMT cultural heterogeneity can actually improve the market performance of CBAs conducted by state-owned PLCs, and it can enhance the profitability performance of CBAs within the high-tech industry. Our analysis highlights the significance of TMT cultural heterogeneity during the post-acquisition integration process following CBAs.

Automated summary

Using data from Chinese publicly listed companies, this paper examines the impact of cultural heterogeneity within the top management team on the post-acquisition performance of cross-border acquisitions. The results show that cultural heterogeneity can increase the likelihood of cross-border acquisitions, but it has a negative impact on the market performance and profitability of privately-owned companies. However, in state-owned companies and high-tech industries, cultural heterogeneity can have a positive effect.