Impact of Religious Differences Between Countries on the Effectiveness of Cross-Border Mergers and Acquisitions Initiated by Companies in Developed Capital Markets

As part of the globalization process the number of international mergers and acquisitions (M&A) is constantly growing. Analysis of the effectiveness of deals shows that some firms fail to reach the planned performance. In search of the reasons for this trend researchers began to pay more and more attention to cultural factors. This study reviews the existing literature on cultural factors in M&A deals. In particular, this paper focuses on the question of how religious differences between countries affect the effectiveness of deals. The aim of the work is to study the nature of the influence of religious differences on transactions and to search for other influencing indicators of the cultural distance between participants of the deal. To achieve the goal such tasks as a review of the existing literature on this topic, an analysis of studies by previous authors, the selection of potentially significant factors, and the search for previously unused variables were solved. Examination of variables used as an indicator of cultural difference shows conflicting results, which makes it relevant to search for a new proxy. This study tests a new measure of cultural distance calculated by the World Value Survey. The study is based on data on Zephyr database international deals from 2005 to 2019. To build a regression model many factors are investigated that can affect the efficiency of transactions such as the size of the transaction, the method of payment, the acquired share, religious differences, cultural distance, the index of economic freedom, the level of development of the financial market, and others. The regression analysis searches for the most significant cultural factors and tests the assumption of their negative impact on the outcome of M&A deals. The research contributes to the development of this topic and has a practical importance for those organizations that are interested in concluding mergers and acquisitions.