Merger Gains and Cultural Differences – For Cross- and In-border Mergers between Corporations from Sweden and the United States

Abstract: Previous literature has stated that few mergers are successful and many fail to meet the set expectations. This study aims to compare cross-border mergers, between corporations from Sweden and from the United States of America, with in-border mergers between Swedish corporations to explore possible differences in synergy gains. The synergy gains are proxied by abnormal returns 80 trading-days post the merger completion date. The results in this study are not statistically significant, however it indicates that cross-border mergers have a negative average cumulative abnormal return while in-border mergers have a positive average cumulative abnormal return. Therefore, this study argues that the result could be a consequence of greater cultural differences for cross-border mergers than in-border mergers and imply that in-border mergers could be the better alternative for Swedish corporations in comparison to cross-border mergers. Additionally, cultural differences should be investigated before a merger decision is taken. Future research should investigate how cultural differences affect synergy gains with a larger sample and include corporations from more nations.