The effects of culture and HRM practices on firm performance

Abstract

Purpose The purpose of this study was to examine the effects of organizational culture and human resource management (HRM) effectiveness on financial performance of a sample of Singapore‐based companies involved in mergers and acquisition activities. Design/methodology/approach The study used the method of content analysis to collect information on cultural values and HRM effectiveness, using Kabanoff's content analysis dictionary. Culture profiles were then assigned to organizations in the sample following the results from cluster analysis. Various financial ratios were used to measure organizational performance. Finally, regression analysis was performed to test various hypotheses. Findings The key finding of the study is that organizations with either elite or leader value profile, when complemented by human resource effectiveness, had a better financial performance as compared to organizations with meritocratic or collegial value profiles. It thus follows that, to achieve better financial results by undertaking merger and acquisition activities organizations need to have elite or leadership value profile. Originality/value This study makes a contribution to the literature by producing new empirical evidence to bear on the effect of organizational culture and human resource effectiveness on financial performance of merging acquiring organizations from a newly industrialized Asian country.