Cultural Distance’s Effect on Short-Term Acquisition Performance - Evidence from Swedish Acquirers

Abstract: This quantitative study aims to investigate whether cultural distance has any significant effect on short-term acquisition performance, measured as abnormal returns for Swedish cross-border acquisitions. This study adds to previous literature through filling the gap where there has been a lack of a sample of Swedish acquirers, using a multi-measurement approach, and having a broad sample of acquisitions conducted in Europe between the years 2000-2022. Short-term performance is measured through cumulative average abnormal returns (CAAR) within a [-2, 2] event window while cultural distance is measured through the Euclidean index, built on Hoftstede’s cultural dimensions. Further, we aim to investigate whether individual dimensions of Hofstede’s cultural distance index has more importance for generating abnormal returns during acquisitions than others. By analysing cultural distance, masculinity and uncertainty avoidance, using a multivariate regression model, the study does not find any significant effect upon cumulative average abnormal returns, or short-term acquisition performance. None of the independent variables has any significant statistical effect upon CAAR. The results therefore questions the significance of cultural distance for short-term acquisitions performance in Europe but opens up for new research using alterations of measurements used for this study.