Cumulative Abnormal Returns During Merger and Acquisition Announcement: How Do Human Capital Assets Affect Cumulative Abnormal Returns During Merger and Acquisition Announcements?

The results presented in this paper strongly support the integrative theory of mergers and acquisitions (Finkelstein and Larsson (1999), which suggests that the organizational integration is one of the most important determinants of M&A success. Overall, the EF is negatively correlated with CARs when the entire data set is analyzed. The results suggest that integration processes become more complicated because the employees from the target firm are more resistant to the new culture due to a low level of cultural domination of the acquiring firm. In addition, the results demonstrate that this effect is strongest in 1) within-industry mergers, 2) cross-region mergers, and 3) mergers involving employees with high-valued skill sets. I find significant effects for the EF only in some specific industry groups that require employees with high skill levels and expertise. Additionally, the findings also show that a group of M&A transactions in which target firms' average deal value per acquired employee is high, indicating that the employees have high skill sets and expertise, experiences a particularly strong effect from the EF.