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Religious similarity in mergers and acquisitions

Author

Listed:
  • Dai, Yunhao
  • Huang, Xu
  • Tan, Weiqiang
  • Yao, Daifei (Troy)

Abstract

This study explores the impact of regional religious similarity on merger and acquisition (M&A) likelihood and post-merger outcomes, diverging from prior research that treats religious adherents as a homogeneous group. Analyzing a comprehensive sample of mergers, we find that pairs of firms with more similar regional religious compositions are more likely to engage in M&As and experience improved merger announcement returns. This religious alignment between acquiring and target firms is also linked to superior post-merger operating performance and efficiency. Cross-sectional analyses reveal that employee integration serves as a critical channel through which these performance gains are realized. Market reactions to merger announcements are more favorable when the target firm has a larger workforce, operates in the same industry, or the acquiring firm is more diversified than the target. Our findings suggest that religious similarity fosters mutual understanding, builds trust, and reduces friction in collaborative efforts, making it a significant driver of post-merger synergy. These insights extend beyond the context of any single market, highlighting the broader role of cultural alignment in enhancing M&A success.

Suggested Citation

  • Dai, Yunhao & Huang, Xu & Tan, Weiqiang & Yao, Daifei (Troy), 2025. "Religious similarity in mergers and acquisitions," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 100(C).
  • Handle: RePEc:eee:intfin:v:100:y:2025:i:c:s1042443125000289
    DOI: 10.1016/j.intfin.2025.102138
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    More about this item

    Keywords

    Mergers and acquisitions; Employee integration; Cultural exposure; Trust; Religious similarity; Announcement return;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • M1 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration

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