The Cultural Foundations of Corporate Control: An Empirical Enquiry

We argue for the importance of culture for the market for corporate control. Utilizing the patterns in settlement of Scots-Irish in the United States, we study the effects of honor culture on corporate control contests. We find that bidding and target firms from an honor culture are less likely to initiate conflict with one another, as reflected by a lower likelihood of the bid being unsolicited and the bid turning hostile. However, we also find evidence that targets from honor places are more defensive once the bid has become hostile, especially when the bidder is from the same culture. These findings advance our understanding of the reasons behind takeover resistance above and beyond managerial incentives and regulatory provisions.