Cross-Border M&A: Does Culture Matter? Rajesh Chakrabarti Narayanan Jayaraman Swastika Mukherjee DuPree College of Management, Georgia Institute of Technology, 800 West Peachtree Street, Atlanta, GA 30332 Chakrabarti Jayaraman Mukherjee Tel: (404) 894-5109 (404) 894-4389 (404) 385-2413 E-mail: rajesh.chakrabarti@ mgt.gatech.edu narayanan.jayaraman@ mgt.gatech.edu swastika.mukherjee@ mgt.gatech.edu Abstract We study whether cross-border acquisitions between firms from culturally disparate countries perform differently than those between firms from culturally proximate nations. We use the Hofstede measure of cultural dimensions to define cultural distance. Using a sample of close to 400 cross-border acquisitions from 1990s, we find that while cross- border acquisitions are detrimental to the stock return performance of the acquirer in general, acquirers do better when the acquisitions are between countries with greater cultural distance. We use alternative measures of socio-legal and cultural distance and find that in most cases such distance helps improve the stock performance of the acquirer. Linguistic difference, which is highly correlated to the Hofstede cultural distance, actually perform slightly better as an explanatory variable for the post-merger stock performance. December 2003