Electronic copy available at: http://ssrn.com/abstract=2096242 Corporate Culture and M&A Activity Leonce Bargeron, Jared Smith, and Kenneth Lehn University of Pittsburgh June 26, 2012 Abstract We examine the relation between a firm’s corporate culture and its M&A activity. We use a ranking system developed by a prominent consulting firm to identify a sample of firms with strong cultures and compare their M&A activity with that of a matched sample of unranked firms. Although the volume of M&A activity is not significantly different for firms with purportedly strong cultures versus other firms, the relative size of acquisitions announced by firms with strong cultures is significantly smaller. Furthermore, when firms with strong cultures announce relatively large acquisitions, bidder returns and the percent change in the combined values of bidders and targets are less than the corresponding returns for other acquirers. Finally, when firms with strong cultures make large acquisitions, they are significantly more likely to lose their ranking as compared with other strong culture firms. Overall, the results are consistent with the conclusion that corporate culture influences the M&A policies of firms. JEL classification: G34 – Mergers; Acquisitions. We thank Kenneth Ahern, Mark Mitchell, and participants at the National Bureau of Economic Research Conference on Corporate Culture for helpful comments.