The Cultural Foundations of Corporate Control: An Empirical Enquiry

Utilizing the patterns in settlement of Scots-Irish in the United States, this study examines the effects of honor culture on corporate control contests. This culture is characterized by the importance of building a personal reputation and maintaining this reputation at all cost. 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. Once the bid has become hostile, we find that targets from honor states are more defensive, as reflected by a smaller likelihood for the bid to be completed. If completed, such bids tend to have a longer deal duration, especially if the bidder is also from such a culture. These findings advance our understanding of the reasons behind takeover resistance above and beyond managerial incentives and regulatory provisions.