Wining, Dining, and Contracting in M&A

Abstract

Wining and dining, as a socially embedded venue for bonding and face-face communication, induces more favorable M&A outcomes. On average, an increase in wining and dining fees of 1 million is associated with a reduction in goodwill impairment that accounts for 2.67% of the purchase price. Utilizing an exogenous shock that curbs wining and dining for a subset of acquisitions as the identification strategy, we find that affected deals experience a greater increase in goodwill impairment, but a greater decline in integration and performance target achievability than unaffected deals, suggesting trust building and information acquisition as two underlying channels.