Cultural diversity in the executive suite and international acquisition performance

Abstract: Many researchers tried to determine the performance effects of cross-border mergers and acquisitions, and what triggers this performance. This thesis contributes to this field of literature by investigating the role of cultural diversity within the executive board on acquisition performance. Where most studies focus on the announcement effects of cross-border acquisitions, this thesis focuses on the long-term effects, trying to capture the role of the executive board in the integration process after an acquisition becomes effective. Using a multivariate clustered regression on a sample of 120 cross-border acquisitions conducted by European firms between 2007 and 2012, this thesis investigates the influence of certain variables related to culture on long-term international acquisition performance. The results show that acquiring firms perform well in the long run after an international acquisition. No evidence was found for the impeding effect of cultural distance on this performance. The results show a positive effect of cultural board diversity on long-term acquisition performance. This effect increases as cultural distance increases. Furthermore, having executives from the target country on the board is beneficial as cultural distance increases. Evidence is also found for a negative effect of board age on long-term performance. Limited evidence is found for a positive effect of openness of the target firm’s country to the world economy on this performance.