Target firm’s integrity culture and M&A performance

Article

Balachandran, Balasingham, Faff, Robert W., Mishra, Sagarika and Shams, Syed. 2024. "Target firm’s integrity culture and M&A performance." Journal of Business Finance and Accounting. https://doi.org/10.1111/jbfa.12818
Article Title

Target firm’s integrity culture and M&A
performance

ERA Journal ID19531
Article CategoryArticle
AuthorsBalachandran, Balasingham, Faff, Robert W., Mishra, Sagarika and Shams, Syed
Journal TitleJournal of Business Finance and Accounting
Number of Pages39
Year2024
PublisherJohn Wiley & Sons
Place of PublicationUnited Kingdom
ISSN0306-686X
1468-5957
Digital Object Identifier (DOI)https://doi.org/10.1111/jbfa.12818
Web Address (URL)https://onlinelibrary.wiley.com/doi/full/10.1111/jbfa.12818
Abstract

This study investigates whether the attribute of integrity culture (derived from target firms’ annual reports) influences merger and acquisition (M&A) performance. We find that a target firm's integrity culture, measured from its 10-K reports, has a positive and significant effect on market reaction to the bidder firm's M&A announcement. Our study's analysis is found to be robust to sample selection bias by utilising the entropy balancing technique and to endogeneity concerns by employing an instrumental variable approach. Our results are also robust to alternative measures of integrity culture and when controlling for a target firm's religiosity and corporate social responsibility, an acquirer firm's fixed effects, chief executive officer's fixed effects, governance for corporate control and advisor quality. We identify the retention of a target firm's directors and of its customers as channels that underlie our main findings. Furthermore, we find that acquisition synergies improve, with decreased time taken to complete the deal, for acquisitions of target firms with a higher integrity culture.

Keywordsmergers and acquisitions, performance; time taken to complete the deal; 10K-reports; CEO fixed effects; CSR; integrity culture; synerg
Contains Sensitive ContentDoes not contain sensitive content
ANZSRC Field of Research 2020350202. Finance
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Byline AffiliationsMonash University
La Trobe University
Corvinus University of Budapest, Hungary
University of Queensland
Bond University
Deakin University
School of Business
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