An empirical study on the impact of cultural fit on post-merger integration of insurance companies in Hong Kong

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An empirical study on the impact of cultural fit on post-merger integration of insurance companies in Hong Kong


Author: Ling, Kam-fai
Title: An empirical study on the impact of cultural fit on post-merger integration of insurance companies in Hong Kong
Degree: M.B.A.
Year: 2001
Subject: Hong Kong Polytechnic University -- Dissertations
Insurance -- China -- Hong Kong
Department: Dept. of Management
Pages: iii, 132 leaves : ill. ; 30 cm
Language: English
InnoPac Record:
Abstract: This study examined the impact of cultural fit on the post-merger integration of insurance companies in Hong Kong. Previous researches suggested that there was a negative association between cultural differences and a group of variables such as shareholder's value, organizational commitment, employees' satisfaction, attitude towards combined organization. Besides, some researchers advocated that appropriate "marriage" of culture type had a deterministic bearing on success of mergers. However, previous researches failed to offer a precise definition for cultural fit and it was not clear whether these research findings of Western countries are applicable to local context. Building on the insufficiency of previous studies, this study developed a vivid definition of cultural fit and defined it to mean "combination of two harmonized culture types that have low cultural differences on congruent mode of acculturation and the dominating or emergent culture of combined organization has a high perceived receptiveness by majority of employees". Further, the applicability of previous researches was replicated by adopting multi-case study approach. Besides, "mixed" methodology approach which embrace the strengths of quantitative and qualitative methods were used. Four mergers: HSBC, Royal & Sun Alliance, CGU and AXA were selected for study as they are key market players in local insurance industry. Most important of all, they represented horizontal and related merger type which are believed to have gone through intensive operational integration in post-merger stage and thus would reveal salient effect of cultural compatibility between merging partners. To measure the impact of cultural fit, the Key Performance Indicators (KPI) evaluated the post-merger performance of different mergers. The KPI used in this study mainly three aspects of performance: Finance, Service and Personnel. The KPI of CGU was found to be the most unsatisfactory even though the combining organization only has insignificant differences. This study has confirmed that cultural differences have an adverse impact on organizational commitment and, in return, on attitudinal and behavioral aspects of managers in general. However, it is also discovered that cultural differences alone have failed to determine cultural fit of merging insurance companies, other measurements have to be employed to explain and evaluate the impact on post-merger integration. As a result, the cultural compatibility matrix as a guideline for evaluating cultural fit of merging organizations was developed. This study also concluded that cultural misfit has a negative impact on most-merger performance and the issue of cultural fit should carry equal weight as strategic fit in selecting merging partners. External environment and domestic culture also exerted moderating effect on organizational commitment and post-merger performance. Drawing from findings of previous and existing studies, a practical mergers and acquisitions Work Book was developed to guide CEO or senior managers in evaluating targets, identifying of synergy potential, planning and implementing post-merger integration.

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