The Transmission of Corporate Culture: Evidence from Bank Acquisitions

• In Event: Governance Gatekeepers

Abstract

This paper examines the transmission of corporate culture in the banking industry. Using bank acquisitions as cultural shocks, we provide causal evidence that acquiring banking groups transfer their corporate culture in terms of risk assessment to newly acquired subsidiaries. Specifically, we find an increase in the comovement between acquiring and target banks' loan loss provisions following the acquisition that is not explained by the economic determinants of such provisions. Our results are stronger when target banks are relatively small and located close to their acquiring group, enhancing acquiring groups' ability to influence target banks' behavior. We perform additional tests to plausibly rule out reverse causality and selection concerns. Overall, our findings shed light on how corporate culture is transmitted in the banking industry.

Authors

• Charles Boissel, HEC Paris

• Thomas Bourveau, Hong Kong University of Science and Technology

• Adrien Matray, Princeton University